Cannabis stocks rose to prominence a few years ago when Canada famously legalized the recreational use of pot. And although some of that initial excitement has died down, there is no question that the industry still presents a lucrative opportunity for long-term investors. According to some estimates, the marijuana market will expand at a compound annual growth rate of 25.4% through 2030.

Buying shares in the right companies could help investors profit from this growth. Let's look at two cannabis stocks that can deliver market-beating returns in the long run and increase investors' wealth: Jazz Pharmaceuticals (JAZZ -0.82%) and Innovative Industrial Properties (IIPR -0.82%).

1. Jazz Pharmaceuticals

Jazz Pharmaceuticals is a biotech company that develops cannabidiol (CBD)-based medicines, among others. Based in the U.S., the drugmaker avoids many of the legal issues that impact pot growers and retailers in the country, most notably the fact that marijuana remains illegal at the federal level. Jazz Pharmaceuticals' Epidiolex, a CBD-based therapy for a duo of rare forms of epilepsy and seizures associated with tuberous sclerosis complex, is approved by the U.S. Food and Drug Administration (FDA) and the parallel agency in Europe. 

Jazz Pharmaceuticals will also seek U.S. approval for nabiximols, a CBD-based therapy that targets spasticity in patients with multiple sclerosis. Nabiximols is already approved in Europe as Sativex. In addition, the biotech is advancing numerous other early-stage CBD-based clinical compounds. But Jazz Pharmaceuticals' lineup extends beyond that. The company markets several other products, including Xyrem and Xywav, both of which treat excessive sleepiness caused by narcolepsy, and cancer medicines Zepzelca and Rylaze. 

The great thing about Jazz Pharmaceuticals' lineup is that its key products were approved not long ago, meaning they will likely keep growing their sales for years before running into patent cliffs. Epidiolex first earned FDA approval in 2018, Zepzelca and Xywav in 2020, while Rylaze first hit the U.S. market in 2021. First approved in the U.S. in 2002, Xyrem has been on the market for more than 20 years, but the drug received approval for pediatric treatment in 2018. Xywav acts as a newer replacement for the drug.

The latter contains far less sodium, which can contribute to various health complications. Xywav allows narcolepsy patients to avoid potential sodium-related issues while still treating their excessive daytime sleepiness. In the third quarter, sales of Xyrem dropped by almost 17% year over year to $256 million. Jazz Pharmaceuticals' revenue from Xywav soared by 67% year over year to $255.9 million as narcolepsy patients continued to switch.

The biotech's total revenue increased by a solid 12.2% year over year to $940.7 million. Jazz's adjusted net income came in at $370.4 million, an increase of 41.7% compared to the year-ago period. Jazz Pharmaceuticals can continue delivering solid financial and stock market performances thanks to a solid lineup and pipeline with multiple ongoing programs that will allow it to earn new approvals in the coming years. 

2. Innovative Industrial Properties 

Innovative Industrial Properties also isn't burdened by the fact that cannabis is illegal at the federal level in the U.S. Some might say it benefits from that. IIPR is a cannabis-focused real estate investment trust (REIT) that acquires properties from marijuana growers and retailers and leases them back. This is one way marijuana companies in the U.S. can free up some capital since access to banking services remains challenging due to federal cannabis laws.

Does that mean IIPR's business would completely implode if the laws change? In my view, the answer is no. Banking lending services can be stringent and come with high-interest rates, especially for relatively small companies. Also, legalizing marijuana at the federal level would likely unleash many more cannabis companies onto the scene to potentially seek the services IIPR offers. These two factors would combine to allow the REIT to remain in business. 

Of course, nobody knows if or when cannabis-related laws will change. And in the meantime, IIPR is delivering strong financial results and still has plenty of room to grow. In the third quarter, the company's revenue of $70.9 million increased by 32% year over year. Its earnings per share jumped by 10% year over year to $1.32. IIPR currently operates in 19 states and has an average lease length of 15.5 years.

Medical uses of cannabis are legal in 39 states and Washington D.C., meaning the company can continue to expand its operations. IIPR had a terrible time on the stock market over the past year, largely because several tenants have failed to pay rent. The short term may remain challenging for the company as it navigates these issues, but investors focused on the long game should look beyond that.

IIPR will continue to benefit from the unstoppable expansion of the cannabis sector. The company is also an excellent dividend stock. REITs are required to distribute 90% of their taxable income as dividends. IIPR has raised its payouts by 80% in the past three years. Patient investors and income-seekers should stay the course with IIPR despite the problems it has encountered lately.