There is major growth appeal from investing in globally important trends. Real estate investment trusts (REITs) aren't the normal category you might think of to play such things. But Hannon Armstrong (HASI -2.00%) and Innovative Industrial Properties (IIPR -0.82%) are both front and center, helping the world get better, or at least happier, by providing growth capital to other companies. Here's how they are helping to make the world better and how you can benefit, too.
1. Hannon Armstrong: Clean power, the mortgage way
There are plenty of options for investors who want to invest directly in clean energy, from manufacturers of solar panels and wind turbines to the companies that operate them. Hannon Armstrong takes a vastly different approach, providing loans to companies in the clean power space. The loans it makes are basically backed by long-term contracts for the power generated by clean energy assets. Although that technically makes Hannon Armstrong a mortgage REIT, this isn't the typical mortgage REIT model.
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The REIT's dividend yield is around 3.1%, which isn't huge, but it is more than you would get from an S&P 500 index fund (1.3%) or the average REIT (2.2%), using Vanguard Real Estate Index ETF as a proxy. The dividend has been increased in all but one year since it started paying dividends in 2013, the year of its initial public offering (IPO).
What's most notable, however, is the growth that the REIT has achieved and expects to achieve in the future. For example, it handily beat its 2021 distributable earnings-per-share projections and notably increased its expectations for the future, now calling for distributable earnings to increase between 10% and 13% on an annualized basis through 2024.
A $4 billion investment pipeline supports that growth, noting that clean energy is both ESG-friendly (environmental, social, and governance) and increasingly important within the power landscape. This REIT is a great way to do good while collecting generous dividend income.
2. Innovative Industrial Properties: Let's get happy
Although you could easily focus on the medical benefits of marijuana, it is hard to deny the euphoric effect this drug can have on people. Either way you look at pot, it can help make the world a better place.
Innovative Industrial Properties is helping that along using the net lease investment approach. Effectively, it has used sale-leaseback transactions to build a portfolio of marijuana grow houses. Net leases require the tenant to pay for most of the operating costs of the assets they occupy, leaving the landlord to -- simplifying things greatly -- just collect the rent.
In this situation, however, the relationship is very important because the hazy legal status of marijuana has kept some traditional sources of capital (like banks) on the sidelines. So Innovative Industrial Properties has proven to be an important partner for the marijuana industry as it expands.
The REIT, meanwhile, has grown its portfolio from zero properties at the time of its 2016 IPO to 105 today. However, the real number to watch here is dividend growth, which has increased from $0.15 per share per quarter when initiated in 2017 to $1.15 per share today. That's shocking growth that simply won't be repeated, but there's plenty of room for Innovative to keep growing as a REIT in the future, perhaps at a slower pace, as pot becomes legalized across the country. This growth, in turn, should keep the dividend heading higher.
Meanwhile, investors can collect a generous 3.2% dividend yield, with very real hopes for solid dividend growth ahead. Even if you only see the medical benefits from marijuana, the dividend story here should make you happy.
Doing good and making money
It can be hard to find a way to invest that also leaves you feeling like the world is ending up a better place. But if you look hard enough, you can do it -- and collect growing dividends along the way. On the clean energy front, Hannon Armstrong is a solid option. For marijuana, medical or otherwise, you'll likely find Innovative Industrial Properties appealing. And you'll be able to sleep well at night knowing you are making the world a better and, perhaps, happier place.
