Innovative Industrial Properties (NYSE:IIPR) offers investors a way to profit from the marijuana industry's expansion while collecting hefty dividends along the way. For these reasons, IIP's stock has proven popular among sophisticated investors.

IIP has a simple business model. It acquires facilities that can be used to produce medical marijuana and leases them to state-licensed growers in the U.S. It's structured as a real estate investment trust (REIT), so it passes nearly all of its profits on to shareholders via a quickly growing dividend.

A cannabis leaf is on top of a $100 bill.

Innovative Industrial Properties is helping its investors cash in on the cannabis boom. Image source: Getty Images.

IIP rapidly expanded its real estate holdings in 2020. It currently owns 66 properties, comprising 5.4 rentable million square feet, in 17 states. That's up from 46 properties at the end of 2019. 

By expanding its cannabis-focused real estate empire, IIP has also been able to rapidly grow its cash flow production and, by extension, its cash payout to investors. IIP's adjusted funds from operations (AFFO) soared 192% year over year to $27.9 million, or $1.28 per diluted share, in the third quarter. That allowed the REIT to pay out a quarterly cash dividend of $1.17 per share, a 50% increase from the year-ago period. 

Investors have rewarded IIP for its impressive growth by bidding its shares up by nearly 150% so far in 2020. When including dividends, its total returns to investors rise to 157%. 

So, if you invested $10,000 in Innovative Industrial Properties stock at the beginning of the year, you'd have more than $25,000 today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.