The cannabis industry has gained prominence in the past five years, and the future could be even more exciting. According to some estimates, the legal pot market in North America will expand at a compound annual growth rate of 16.6% through 2028.

And it likely won't stop there. Investors can cash in on this opportunity by investing in the right cannabis companies. Two excellent picks to consider are Innovative Industrial Properties (IIPR 1.03%) and Trulieve Cannabis (TCNNF 0.20%).

1. Innovative Industrial Properties

Innovative Industrial Properties can be a great source of growth and dividends. As a real estate investment trust (REIT) that focuses on the medical cannabis sector, the company must distribute 90% of its taxable income as dividends. In our current inflationary environment, dividends can come in handy as a hedge against rising prices. But there is more to this company than its 4.84% yield.

Person carrying jar with cannabis flower.

Image source: Getty Images.

Innovative Industrial Properties purchases real estate assets from medical cannabis companies and leases these back to the sellers. These transactions help pot companies acquire the capital they often need to grow their operations in an environment where it can be tough to access traditional banking services due to federal marijuana laws.

Innovative Industrial Properties benefits when it expands its portfolio of real estate assets and collects stable and predictable streams of income from its clients. Even if traditional banking services were available to cannabis companies, the REIT provides a creative alternative to the stringent requirements and high-interest loans that financial services typically offer.

Even if marijuana is legalized at the federal level in the U.S. within the next decade, I expect Innovative Industrial Properties to continue to thrive.

The company's shares have gotten hammered in the past year, but it continues to deliver solid financial results. In 2021, total revenue increased by about 75% year over year to $204.6 million. In addition, the REIT's net income grew by about 75% to $112.6 million. Quarterly top-line growth has slowed, which might be one reason behind its recent poor performance. But there remains plenty of room to expand.

Currently, the company owns 105 properties in 19 states. Medical cannabis is legal in 38 states and Washington, D.C. As Innovative Industrial Properties continues to make headway, expect its revenue growth rates to stabilize. All in all, it looks set to profit from the growth of the cannabis industry in North America, and that's why it's an excellent pot stock to consider holding for the next 10 years. 

2. Trulieve Cannabis 

Trulieve Cannabis is practically in a class of its own among pure-play pot growers in North America. The company ended 2021 with a U.S. market-leading 162 dispensaries. On an adjusted basis, it has been profitable for 16 consecutive quarters. That might not seem like a big deal, but many cannabis companies in the U.S. and Canada have struggled to be profitable even for two straight quarters.

Trulieve Cannabis has now done it 16 times in a row. What's the company's secret? In my view, one thing that sets it apart is prudent capital allocation. Many pot companies chose to expand their operations by making acquisition after acquisition.

The problem is that these companies were typically consistently unprofitable and did not have the cash necessary to fund these shopping sprees, meaning they often had to rely on dilutive forms of financing. Aurora Cannabis is an excellent example of this strategy, and things have not worked out well for the Canada-based pot grower.

By contrast, Trulieve Cannabis focused much of its efforts (and cash) on establishing a strong presence in Florida. Once it became the leader in the cannabis market in the Sunshine State, it substantially expanded its operations elsewhere thanks in large part to a strategic acquisition. In October, it acquired Harvest Health and Recreation in an all-stock transaction valued at $2.1 billion. Harvest Health is headquartered in Arizona and is prominent in the West and Northeast.

That is a nice addition to Trulieve's dominance in Florida. While the company is dealing with short-term issues that have caused its stock to drop in the past year, including slowing revenue growth and rising expenses due to the recent acquisition, this new combined entity is now in an even stronger position to profit from the growth of the cannabis sector in the U.S.

Patient investors probably can't go wrong with Trulieve Cannabis right now.