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Why Marijuana Stock IIPR Popped 13% in July and Is Up 6% in August So Far

By Beth McKenna – Aug 9, 2021 at 1:25PM

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Shares of this dividend-paying cannabis REIT have more than doubled over the last year.

What happened

Shares of Innovative Industrial Properties (IIPR 2.85%) jumped 12.6% in July, according to data from S&P Global Market Intelligence. The S&P 500 index returned 2.3% last month. 

The stock's monthly gain largely stems from continued investor enthusiasm about the prospects for the cannabis-focused real estate investment trust (REIT), rather than a specific catalyst. However, a portion of July's rise can be attributed to a Wall Street firm initiating coverage of the stock with an outperform rating.

Shares of IIP (as the company is often called) tacked on 6.3% last week, the first week of August, thanks to the company's release of strong second-quarter results. Through Friday, Aug. 6, the stock has returned 112% over the one-year period, compared to the broader market's 34.5% return. 

Marijuana leaf on white background.

Image source: Getty Images.

So what

In July, IIP stock climbed rather slowly and steadily throughout the month. It did pop 2.8% on July 2 following Wolfe Research initiating coverage of the stock with a rating of outperform (Wall Street speak for a buy). But this was the only notable daily stock move following the release of news from or about the company. 

In August, IIP stock has risen 6.3% so far. On Wednesday, Aug. 4, the company released second-quarter results that beat Wall Street's estimates on the top and bottom lines. Shares jumped 6.8% in the two days following the release.

In the second quarter, IIP's year-over-year revenue, earnings per share, and adjusted funds from operations (FFO) -- a key REIT metric that drives dividend changes -- surged 101%, 60%, and 38%, respectively.

The company acquired four properties during the quarter and one after the quarter ended, bringing its total to 73 properties as of Aug. 4. In addition, it raised its quarterly dividend 32% from the year-ago period. Shares are currently yielding about 2.45%.

Now what

For full year 2021, Wall Street analysts are modeling for Innovative Industrial Properties' annual revenue to grow 66% to $193.8 million, and its EPS to increase 44% to $4.71.

IIP is a rare breed in the cannabis space for two reasons: It's consistently profitable and it pays a dividend. 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.

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