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Why Cannabis Stock IIPR Returned 19% in the First Half of 2020

What Happened

Innovative Industrial Properties (NYSE: IIPR) stock returned 18.9% in the first half of 2020 (January through June), according to data from S&P Global Market Intelligence. The S&P 500 index had a negative 3.1% return over this period.

The company, often referred to as IIP, is a real estate investment trust (REIT) focused on the cannabis industry. It specializes in industrial properties used for growing and processing cannabis in U.S. states where medical marijuana is legal.

So What

We can attribute IIP stock's solid performance in the first half of 2020 to the company's continued strong financial performance. While most companies in the cannabis space are not profitable, IIP is firmly in the green. Moreover, it also pays a generous dividend, currently yielding 4.5%.   

In the first quarter, revenue skyrocketed 210% year over year to $21.1 million, earnings per share (EPS) soared 118% to $0.72, and adjusted funds from operations (FFO) -- a key metric for REITs that drives dividend payouts -- surged 107% to $1.12. 

During the quarter IIP acquired seven properties, and it acquired two more between the end of the quarter and May 6, the date of the earnings release. At that time it owned a total of 55 properties.

As you can see in the following chart, IIP has recovered fairly decently from the pandemic-driven market sell-off that started in mid-February and deepened in March. That's not the case with most stocks in the group. The three largest Canadian growers by market cap, Canopy Growth, Cronos Group, and Aurora Cannabis, lost about 23%, 22%, and 52%, respectively, in the first half of 2020.

IIPR Total Return Price Chart

Now What

For full-year 2020, Wall Street analysts are modeling for Innovative Industrial Properties to grow revenue and EPS 147% and 73%, respectively, year over year.