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If You Invested $1,000 in Innovative Industrial Properties in 2016, This Is How Much You Would Have Today

By Jamal Carnette, CFA – Oct 2, 2021 at 7:43AM

Key Points

  • Innovative Industrial Properties has made believers out of doubters in just five years.
  • Shares have rallied more than 10 times and are just getting started.

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In less than five years, Innovative Industrial Properties stock has exploded...and that's not even the most impressive part of its total return.

Cannabis is moving forward in a major way. For a quick comparison, on Election Day 2020, four states voted for recreational marijuana and four others have since followed, bringing the total number to 19. For a brief point of comparison, when Innovative Industrial Properties (IIPR 1.67%) went public, only eight states had legalized recreational marijuana.

Things look better for Innovative Industrial Properties as the real estate investment trust, or REIT, specializing in renting industrial property for medical marijuana growers. Medical use marijuana is legal in approximately 40 states and has near universal acceptance in America with 91% approval according to a recent Pew Research Center poll.

The change of heart among Americans and state lawmakers has been a boon to Innovative Industrial Properties' bottom line, but how much would a $1,000 investment in 2016 be worth today?

Hundred dollar bills formed in the shape of a marijuana leaf.

Image source: Getty Images.

"Marijuana stock goes up in smoke..."

Shares of Industrial Innovative Properties have been public for nearly five years. The company went public in December 2016 at an IPO price of $20 per share. The math is quite simple: If you purchased $1,000 at the IPO price, you'd have 50 shares.

As a rule of thumb, it's often misleading to base returns for public investors off IPO prices. After all, for high-flying tech stocks, it's common to see prices double on the IPO day; the only people lucky enough to get shares at IPO prices are accredited investors.

However, this wasn't the case for Innovative Industrial Properties stock. In fact, shares floundered on its public debut. Properly capturing the zeitgeist at the time, CNN Business quipped: "Marijuana stock IPO goes up in smoke," noting its 4% decline on the day in an article equally filled with bad puns and overall bearishness.

At one point, the CNN article appeared prescient, considering Innovative Industrial Properties spent the bulk of its first year of trading below $20 per share. As an upside, the sluggish stock performance gave mom-and-pop investors ample opportunity to buy shares at or below the IPO price.

Since then, shares have been on fire: Currently, Innovative Industrial Properties stock trades hands for $230 per share, meaning those same fifty shares are now worth $11,500.

Capital appreciation is only one part of IIPR's story

As impressive as Innovative Industrial Properties' stock appreciation has been, it isn't even the best part for long-term investors. As a REIT, Innovative Industrial Properties is required to return 90% of taxable income to investors in the form of dividends. For that reason, most investors view dividend payouts as the primary reason to invest in this asset class.

At first, Innovative Industrial Properties' dividend seems rather unimpressive. While a 2.5% yield is nearly double the greater S&P 500's payout of 1.3%, many other REITs have higher yields. However, this obscures the fact that Innovative Industrial Properties is a dividend-growth juggernaut: Its last quarterly payout of $1.50 is ten times larger than its first in 2017.

As a result of growth, the company now pays out nearly $6 per share every year -- good for a current yield-on-cost of 30% based on the IPO price. All told, if we were to add up all dividends Innovative Industrial Properties has paid out since going public, they would total  $13.27 per share, which equals nearly two-thirds of its IPO price.

Look for continued growth from Innovative Industrial Properties

While attaining the same torrid growth levels will be nearly impossible, the long-term growth story will continue for Innovative Industrial Properties. Cannabis analysis firm New Frontier Data expects the legal cannabis market in the United States to double by 2025 on its way to becoming a $41.5 billion industry. Look for the company to continue growing revenue and giving outsized dividend increases for years to come.

Jamal Carnette, CFA owns shares of Innovative Industrial Properties. The Motley Fool owns shares of and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Innovative Industrial Properties Stock Quote
Innovative Industrial Properties
IIPR
$117.27 (1.67%) $1.93

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