Had you invested in Innovative Industrial Properties (IIPR 0.11%) during its 2016 IPO, you would have a good start on becoming a millionaire. Initially offered at $20 per share, the real estate investment trust (REIT) now trades for around $240 per share, a better-than-1,150% increase, or a compounded growth rate of almost 74% annually.

Don't expect Innovative Industrial Properties to continue growing at such meteoric rates -- no business can maintain such a pace forever -- but don't expect it to collapse, either. In fact, there are several good reasons this REIT could be a millionaire-maker stock.

Marijuana in a pill jar

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A mutually beneficial relationship

Innovative Industrial Properties specializes in the medical marijuana field, and is the first and leading REIT when it comes to owning, managing, and leasing cultivation and processing properties. It currently owns 73 properties across 18 states, equal to some 6.6 million square feet, all of which were leased to state-licensed marijuana growers for an average period of 16.7 years.

It's also built growth into its business model by passing along annual rent increases to its tenants while collecting property management fees.

Moreover, because marijuana remains illegal at the federal level, Innovative Industrial's sale-leaseback program ensures it will have a steady list of customers waiting to participate. Multistate operators (MSOs) like PharmaCann and Cresco Labs -- two of the REIT's largest tenants representing 13% and 8%, respectively, of its total rental revenue -- struggle to access basic banking services due to regulatory prohibitions. Innovative Industrial is able to step into the void by purchasing facilities for cash and immediately leasing them back to the seller. The MSOs get much-needed cash, and the REIT gets more long-term tenants.

Man with laptop in marijuana production facility

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A very profitable operation

Just like other REITs, Innovative Industrial is obligated to return 90% of its profits back to its shareholders. That's been a pretty good deal for investors, as the REIT has quadrupled its dividend since going public. In fact, it's increased the payout 11 times since it first initiated a dividend.

The payout of $5.60 per share currently yields a healthy 2.3% annually, higher than the S&P 500's current average of 1.3% and a a happy byproduct of the capital appreciation shareholders have also enjoyed. As noted earlier, Innovative Industrial's stock has exploded since its IPO, and it's up over 30% in 2021 alone. In comparison, the rip-snortin' S&P 500 is up less than 20% year-to-date.

Depending on who's counting, marijuana is forecast to grow tremendously over the coming years, with some industry researchers expecting it to hit over $97 billion globally by 2026, a 33% compounded annual growth rate. 

Even if marijuana is never legalized federally and only incrementally creeps across the country state by state, Innovative Industrial Properties will still prosper as vertically integrated growers and retailers seeking to expand look for access to more capital. 

If it is legalized, though, while that will may impact future growth somewhat since pot companies will have access to more financing options, the 16-plus year lease terms on existing properties give Innovative Industrial highly predictable cash flow for years to come. It has built relationships with many of the largest multi-state operators, which could result in it still netting deals in the future. After all, casino REITs are quite successful despite the resort operators having full access to financing.

Also, small cannabis companies will still need money beyond what they can get from traditional institutions, and the REIT itself will have greater access to money that will improve its ability to increase its leverage beyond the negligible amounts it currently has. Legalization may change the equation some, but it's nowhere near a death knell for Innovative Industrial.

Minting millionaires in marijuana

Becoming a millionaire through stock market investing is possible, so long as you don't think of it as a get-rich-quick scheme. It's a long-term goal you aim for, not a sprint toward overnight success.

That said, some companies will help you achieve your goal quicker than others. Innovative Industrial Properties is one whose potential seems limitless, and ought to move you along well on your way to millionaire status.