The stock market is in correction territory, and with rising interest rates and inflation on the march, now certainly seems like a good time to let your cash rest until things look better. But you might want to look again.
There are bargains out there, including some real estate investment trusts (REITs) that can be candidates for doubling your money if you buy now and wait. Two of them are Crown Castle International (CCI -0.03%) and Innovative Industrial Properties (IIPR 0.06%).
REITs are dividend stocks that combine the risk and reward of owning stock and real estate, giving shareholders a mandated minimum of 90% of the taxable income produced by the properties they own. That means you enjoy some passive income along with whatever happens to the share price itself.
The share price, of course, will reflect the market's opinion of each REIT's prospects, set against the backdrop of the prospects for the industries each of these companies inhabits. Crown Castle and IIP are in very different businesses, but each business has clear momentum.
Mobile and marijuana infrastructure
Crown Castle is one of the major providers of mobile communications infrastructure and is rapidly expanding its inventory of about 115,000 small-cell nodes to meet the insatiable demands of the rollout of 5G service, even as it adds to its current collection of more than 40,000 full-size cellular towers and 80,000 miles of fiber cable.
Crown Castle claims its $40 billion-plus investment in such infrastructure gives investors the largest possible exposure to 5G development in the U.S., and the company boasts an industry-leading average annual total return of 14% since the 2017 establishment of 5G standards.
IIP, meanwhile, has a very specific niche: It's the first, largest publicly traded provider of real estate capital to regulated marijuana producers in the US., with a growing portfolio of 111 properties that it typically buys and then leases back to growers in 19 states.
This, too, is a growth industry, with regulated cannabis sales expected to nearly double between now and 2026. The list of 38 states (along with Washington, D.C.) where cannabis is legal is also expected to grow.
Strong performance history at bargain prices
Crown Castle went public at $13 a share on Aug. 18, 1998, and now trades at about $170 a share, a gain of about 1,200% that's even more impressive when you factor in the dividend payout. Total return since the IPO is about 1,700%, meaning a $10,000 stake then is worth about $180,000 now. This REIT's stock was at an all-time high of $208.74 on Dec. 31, so it's down about 19%.
IIP, meanwhile, went public on Dec. 1, 2016, at $20 a share and peaked at $288 last Nov. 11 but has since collapsed to about $113 a share, a drop of 60%. However, that's still good for a total return of about 630% since its IPO, and, like Crown Castle, there are good reasons to expect a rebound.
Different, but in some ways the same
While sharply different companies, Crown Castle and IIP both benefit from long-term leases and high occupancy from a tenant base whose ability to operate is inexorably tied to their space providers.
Both REITs also are strongly profitable and also have shown both the ability to consistently grow funds from operations (FFO) and the willingness to use that cash flow to grow dividend payouts. They've also been expanding their portfolios without excessive debt. Their yields also have improved lately, since their prices went down and their dividends stayed steady. Crown Castle is at about 3.4%, while IIP has risen to nearly 6% of late.
CCI Dividend data by YCharts
Take some risk to reap the rewards
Between the two, IIP feels a bit riskier, with only about a dozen or so tenants versus the vast lineup of major carriers and customers large and small that rent tower and small-cell space from Crown Castle. But the market is there for cannabis growers, and someone's going to take that real estate and pay that rent. IIP has shown it knows how to capitalize on that business.
Crown Castle, meanwhile, is in a more mature industry but one that is hardly played out. Its stock would have more work to do to double today's share price, since it's not as beaten down, but it has a strong history of growth and is clearly positioning itself for more.
I own both of these stocks. I'm actually a good bit underwater in IIP but intend to hang on, and I'll probably add to my position in both sooner than later.
