Shares of marijuana industry focused landlord Innovative Industrial Properties (NYSE:IIPR) rose 19% in December according to data from S&P Global Market Intelligence. That's a pretty heady gain for a one-month span, but it wasn't actually all that surprising for this real estate investment trust (REIT), which was up an incredible 141% in 2020.
The backstory here is that the marijuana industry continues to expand as more and more states move toward legalizing the drug. Innovative is, at its core, a landlord, owning grow houses and other marijuana related properties. But that's only half the picture, since what it often provides its tenants is access to capital. Using sale/leaseback transactions, Innovative allows companies to get property off their balance sheets, freeing up cash that can be used to pay down debt or to invest in growth initiatives.
Innovative inked two such deals in December. One was for an expansion at an existing asset that included a rent hike for the lessee. The other was a sale/leaseback deal for two properties with a new tenant. Taken together, they show that Innovative's growth plans remain on track. Adding to the positives in December, the REIT also announced a sequential quarterly dividend increase of 6%, which represented a year over year increase of 24%. No wonder investors remained upbeat on the shares.
Innovative Industrial Properties is doing very well right now and Wall Street is rewarding it for that success with a higher share price. December just continued the trend, so the monthly gain makes complete sense. However, income investors need to remember that this is a growth-oriented REIT operating in a very specific niche. It may not be appropriate for everyone.