Innovative Industrial Properties (IIPR 0.40%), a real estate investment trust (REIT), has been doing exceptionally well for the past few years thanks to its unique business model that associates it with the cannabis industry. The company provides real estate capital to cannabis companies in the U.S. and in return earns rental revenue. The boom in the marijuana industry is taking the company to great heights.

Innovative offers investors an indirect entry into the cannabis sector while being protected from all its ups and downs. Besides offering a safe entry to the sector, it offers some additional perks of investing in it, too. Let's take a look at why this company is a solid buy right now.

A person standing in a cannabis plantation.

Image source: Getty Images.

No stopping this growth stock

Medical cannabis is legal in 36 states and the District of Columbia, while the recreational form is allowed in 19 states and D.C. However, the drug remains illegal at the federal level. This prohibits cannabis operators from getting access to any financial help from banks and financial institutions to set up large production facilities. Here, Innovative comes into the picture.

It buys these properties and then leases them to the cannabis companies in a sale-leaseback system. Rental revenue is its only source of income and has been surging at a drastic rate. The company has grown its revenue by 1,728% from $6.4 million in fiscal 2017 to $117 million in fiscal 2020.

In its recent quarter ended June 30, total revenue surged 101% year over year to $49 million, while profit grew to $29 million from $13 million in the year-ago period.

One can be sure of Innovative's growth prospects by looking at its list of tenants that include popular cannabis companies. Cresco Labs, Trulieve CannabisCuraleaf Holdings, and Green Thumb Industries are all thriving cannabis operators that are expanding aggressively, thus bringing in more business for Innovative. Looking at its revenue trend and the cannabis industry's growth, Innovative is poised for a flourishing future.

Between July 1 and Oct. 1, the company made four acquisitions. Recently, it acquired a 201,000 square-foot industrial property and entered into a long-term lease agreement with California-based cannabis operator Gold Flora. This different business model has allowed Innovative to now own 76 properties (100% of its properties are leased out) in 19 states totaling 7.5 million square feet of space. Furthermore, the company's weighted-average lease term is 16.6 years, meaning it will keep generating revenue for many years to come. 

Its consistent dividends are attractive

The added perk of investing in Innovative is that it pays dividends. When considering a dividend stock, investors should look at how consistent a company pays dividends rather than how high the yield is. Its dividend yield of 2.5% is above that of the S&P 500 's average of 1.3%.

But the fact that Innovative not only pays dividends regularly but also increases them is a sign of a stable and strong company. Its rising consistent adjusted funds from operations (AFFO) is proof of that. AFFO measures how much of a company's profits are available to be given out to shareholders, similar to net earnings for a non-REIT. In Innovative's second quarter, its AFFO jumped 105% year over year to $43 million.

As a REIT, Innovative is legally required to pay 90% of its taxable income to shareholders as dividends. Thanks to the jump in AFFO, the company made a 28% year-over-year quarterly dividend hike to $1.17 per share as third-quarter dividends. This hike is also its 12th dividend increase since its initial public offering in 2016. 

There isn't a better time to include this pot stock in your portfolio

For its third quarter ending Sept. 30, analysts expect revenue to be around $52.5 million, a 53% year-over-year increase. Analysts see revenue growing further in the fourth quarter -- drawing in total growth in revenue for the full year of 73% to $202 million versus fiscal 2020. This number could jump up another 41% to $284 million in fiscal 2022.

Note that these estimates don't include any additional rental revenue the company could bring in as legalization ramps up and cannabis companies keep expanding.

The company is expected to report its third-quarter results on Nov. 4.

Its consistent, strong fundamentals assure investors can look forward to another great quarter. This pot stock is trading 50% below its 52-week high, making it the right time to consider buying it.