According to a recent report by Fortune Business Insights, the global cannabis market is on track to achieve an astonishing valuation just shy of $100 billion by the year 2026, from less than $11 billion in 2018. The booming growth that the industry has experienced in recent years, and is set to realize in the years ahead, provides a wealth of opportunity for long-term investors as both medical and recreational-use marijuana legalization ramps up.
Whether you tend to be more risk-tolerant or favor lower-volatility trades, there are choices for investors of all preferences and trading styles among the top marijuana stocks. Let's look at two great pot stocks that have delivered exceptional financial and share-price growth through the ups and downs of the pandemic and can continue to enrich investors' portfolios for the long term.
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1. Innovative Industrial Properties
Innovative Industrial Properties (IIPR -1.61%) is a unique choice in the world of pot stocks, because of both the structure of its business and the fact that it pays a robust dividend.
As a real estate investment trust (REIT), Innovative Industrial Properties isn't in the business of manufacturing or selling cannabis products, nor does it operate dispensaries, as many other pot stocks do.
Instead, it owns a substantial portfolio of 74 commercial properties spread across the U.S in key markets including California, Colorado, Illinois, and Florida. It leases its portfolio of greenhouses and other facilities to licensed medical marijuana growers. Some of its tenants include well-known cannabis brands like Harvest Health & Recreation, Trulieve, and Cresco Labs.
The dividend currently yields a healthy 2.3%, which is higher than the S&P 500's average yields of a little under 2%. The REIT has been faithfully paying its dividend for about four years now, and it regularly increases its payout. For example, when management released the company's second-quarter dividend information, it announced that the payout would be 32% higher than the second-quarter dividend in 2020.
Innovative Industrial Properties' dividend isn't the only draw for long-term investors. The company's success in leasing to cannabis growers operating solely in the medical-use sector of the industry has led to a consistent track record of gains year after year and quarter after quarter. For instance, in the years 2018, 2019, and 2020, it reported year-over-year revenue jumps of 130%, 202%, and 162%, respectively.
In its most recent quarterly report, the company said it generated total revenue growth of 101% year over year. This was also an incredibly profitable quarter, as net income and adjusted funds from operations (a more precise measure of a REIT's profits) surged by 124% and 104%, respectively, year over year.
Innovative Industrial Properties' consistent history of top- and bottom-line growth has generated substantial investor confidence. Over the past five years, shares have spiked by nearly 1,200%. And over the trailing 12 months, they have jumped nearly 100%. Its dividend and its solid history of share-price gains can both provide notable long-term growth to a buy-and-hold portfolio.
2. Jushi Holdings
Jushi Holdings (JUSHF 9.77%) is the type of company that investors traditionally think of when talking about marijuana stocks. The multi-state operator owns a chain of retail locations in four states at the time of this writing: thirteen in Pennsylvania, four in Illinois, two in California, and one in Virginia. In addition, Jushi operates multiple cultivation and processing facilities across the country, and acquired two dispensaries in Massachusetts earlier this year. Management has also said that it plans to open several more retail locations and dispensaries in the second half of the year.
Pennsylvania is one of a number of states where medical cannabis is legal but recreational cannabis is not, while the substance is fully legalized for both purposes in Illinois, California, Virginia, and Massachusetts. (Retail sales are not set to begin in Virginia until 2024.) Meanwhile, Pennsylvania (where Jushi Holdings has its most substantial presence with 13 open dispensaries and permits for as many as 18) is a key medical-use market. Medical marijuana sales in Pennsylvania between January 2020 and January 2021 alone totaled $910 million, according to cannabis data and market intelligence provider Headset.
Jushi is also known for its collection of cannabis-based brands, which include The Lab Concentrates (vape products and concentrates), Tasteology (edibles), and Nira (hemp-based CBD products).
Revenue growth was 690% in the full-year 2020. In the most recent quarter, Jushi reported that its revenue rose by just shy of 220% year over year. Gross profits jumped a healthy 9% from the prior quarter.
Shares have fallen somewhat since the beginning of this year, but are still trading nearly 140% higher than just 12 months ago. Even so, the stock still trades at around $5. This pot stock is a bargain buy you can invest in now and easily hold for years as its fast-expanding national footprint and growing brand authority rake in higher gains and translate to continued share-price appreciation.
