Best Buy: Industrial Innovative vs Curaleaf
A new federal legalization bill has been introduced in the House of Representatives called the States Reform Act. It would treat marijuana like alcohol and allow states to decide how best to regulate it. What’s unique about the legislation is that it was introduced by Republicans, giving supporters of decriminalization hope that a two-party solution can be found.
This could give new potential to the pot sector by opening up new avenues for growth. Yet whether the current patchwork of state-by-state legalization is maintained or a new federal mandate kicks in, Curaleaf (OTC: CURLF) and Innovative industrial properties (NYSE: IIPR) represent unique opportunities for investors to benefit from their individual strengths.
What’s the best buy now? Here are the reasons why the multi-state operator (MSO) and marijuana-focused real estate investment trust (REIT) are the best places for your money.
The case of innovative industrial properties
Rich Duprey: Innovative Industrial Properties was the first REIT to target the ownership, management and leasing of marijuana growing and processing properties, and remains the leading one today. It owns 76 properties in 19 states, representing approximately 7.5 million square feet, and all leased to state-licensed marijuana growers for an average period of 16.7 years.
This means that even if marijuana is legalized at the federal level – and the forces pushing cannabis stocks to partner with Innovative Industrial dry up – it will still have a steady stream of income for years to come.
Still, there is no reason to believe that legalization will have a negative impact on the REIT. Although many marijuana companies enter into sale-leaseback agreements for their properties with IIP because access to financing through traditional financial institutions is not available due to federal regulations, IIP will still be in operation. able to enter into agreements. He has long-standing relationships with many of the larger MSOs that will not be broken by legalization and small cannabis companies will always need money beyond what they can claim from traditional institutions.
Just look at the REITs targeting the casino industry. They are thriving today even though casinos are fully capable of exploiting bank funding. It will be the same with pot companies as they will be able to focus on growing their specialty marijuana strains, which is really their reason for existing, and won’t have to worry about being a property manager.
Like all REITs, Innovative Industrial is obligated to return 90% of its profits to its shareholders, which means that investors can profit from their returns by paying dividends. Since its IPO in 2016, the REIT has increased the payout 11 times and the dividend has since quadrupled.
Innovative Industrial’s dividend yields a little less than 2% per year, well before the S&P 500with an annual return of 1.3%, which makes this REIT a strong candidate for any marijuana investor’s portfolio.
The case of Curaleaf
Keith Speights: Curaleaf’s revenue growth slowed and its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were lower than expected in the third quarter. However, the multi-state cannabis operator – and the cannabis industry, in general – has faced temporary headwinds, with consumers spending less. Curaleaf still has good growth prospects ahead.
In particular, Curaleaf is well positioned in two key states that have recently legalized recreational marijuana: New Jersey and New York State. The company holds one of 12 New Jersey licenses and already operates four dispensaries in New York. Connecticut also presents a strong opportunity for Curaleaf. It is one of four licensed cannabis producers in the state.
Curaleaf’s acquisitions are also expected to boost growth. Earlier this month, the company announced it was buying Tryke for $ 286 million. This agreement was applauded by investors. The addition of Tryke will expand Curaleaf’s position in the cannabis markets of Arizona, Nevada and Utah.
The US cannabis market continues to grow. Federal cannabis reform may be underway. Curaleaf is one of the market leaders and boasts one of the strongest balance sheets in the industry. He’s about to be a big winner in the long run.
What is the best buy?
Investors have dampened their enthusiasm for marijuana stocks since the early days of cannabis legalization in Canada. They all seemed to reach new heights before quickly extinguishing themselves.
Over the past three years, however, Curaleaf and Innovative Industrial Properties have outperformed the benchmark even though it continually sets new records. This suggests that an investor would do well for the MSO or REIT to move into their portfolios.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
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