Insights

Is IIPR Stock a Buy? Only if You Like Strong Growth and Big Dividend Hikes

Innovative Industrial Properties (NYSE: IIPR) stock gained 4.9% in Wednesday’s after-hours trading session following the cannabis-industry-focused real estate investment trust’s (REIT) release of robust first-quarter 2022 results.
Here’s how the quarter turned out for Innovative Industrial Properties and its investors.
Image source: Getty Images.

Innovative Industrial Properties’ key numbers
Metric
Q1 2022
Q1 2021
Change
Revenue 
$64.5 million
$42.9 million
50%
Net income
$34.7 million
$25.6 million
36%
Earnings per share (EPS)
$1.32
$1.05
26%
Adjusted funds from operations (AFFO)*
$53.8 million
$38.4 million
40%
AFFO per share
$2.04
$1.47
39%
Data source: Innovative Industrial Properties. *Funds from operations (FFO) is a closely watched metric for companies organized as REITs. It adds depreciation expense back to net income and makes a few other adjustments to net income to reflect a REIT’s cash flow.
Revenue growth was driven “primarily by the acquisition and leasing of new properties, additional improvement allowances and construction funding at existing properties resulting in adjustments to base rent, and contractual rental escalations at certain properties,” the company said in the release.
Wall Street had been looking for EPS of $1.36 on revenue of $63.3 million. So, IIP (as the company is sometimes called) beat the revenue expectation, but fell slightly short of the earnings estimate. “Investors generally care more about the performance of adjusted FFO than that of earnings, so missing the Street’s EPS expectation won’t usually affect IIPR stock to the same degree that it might affect non-REIT stocks,” as I wrote last quarter when this same scenario played out. Adjusted AFFO growth was powerful in the quarter, as the above chart shows. 
The company remains in good shape from a balance sheet standpoint. It ended the period with about $253 million in cash, cash equivalents, and short-term investments, down from $406 million last quarter. Its debt load was 14% of its total gross assets, which total about $2.2 billion. This represents “a total annual fixed cash interest obligation of approximately $16.9 million, with no debt maturing in 2022 or 2023,” the company said in the release.
For context, in the fourth quarter of 2021, IIP’s revenue surged 59% year over year to $58.9 million. Earnings per share rose 25% to $1.14, and adjusted FFO per share jumped 42% to $1.85.
What happened with Innovative Industrial Properties in the quarter (and since the quarter ended through May 4):
It paid a quarterly dividend of $1.75 per share on April 14 to stockholders of record as of March 31, representing an increase of 33% from the year-ago period. Shares were yielding 4.71% as of the close of Wednesday’s regular trading session.
During the quarter, the company acquired four new properties, as I covered in my earnings preview. The company released this data in early April. These properties were in California, Massachusetts, New Jersey, and Pennsylvania. The company already owned properties in these states, so none of these purchases represented an entrance into a new state.
After the quarter ended through May 4, it made two more property acquisitions: one each in Maryland and Arizona. The company already owned property in both of these states. 
Here’s the current snapshot of Innovative Industrial Properties’ portfolio, taken directly from the earnings release:

As of May 4, 2022, IIP owned 109 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington [19 states], representing a total of approximately 8.1 million rentable square feet (including approximately 2.4 million rentable square feet under development / redevelopment), with a weighted-average remaining lease term of approximately 16.4 years.

Innovative Industrial Properties turned in another robust quarter, which included investors getting a juicy 33% year-over-year dividend increase.
Investors should learn more about the quarter and management’s broad outlook on the earnings call, which is scheduled for Thursday at 1 p.m. ET.
Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy. –

Innovative Industrial Properties (NYSE: IIPR) stock gained 4.9% in Wednesday’s after-hours trading session following the cannabis-industry-focused real estate investment trust’s (REIT) release of robust first-quarter 2022 results.

Here’s how the quarter turned out for Innovative Industrial Properties and its investors.

Image source: Getty Images.

Innovative Industrial Properties’ key numbers

Metric
Q1 2022
Q1 2021
Change
Revenue 
$64.5 million
$42.9 million
50%
Net income
$34.7 million
$25.6 million
36%
Earnings per share (EPS)
$1.32
$1.05
26%
Adjusted funds from operations (AFFO)*
$53.8 million
$38.4 million
40%
AFFO per share
$2.04
$1.47
39%

Data source: Innovative Industrial Properties. *Funds from operations (FFO) is a closely watched metric for companies organized as REITs. It adds depreciation expense back to net income and makes a few other adjustments to net income to reflect a REIT’s cash flow.

Revenue growth was driven “primarily by the acquisition and leasing of new properties, additional improvement allowances and construction funding at existing properties resulting in adjustments to base rent, and contractual rental escalations at certain properties,” the company said in the release.

Wall Street had been looking for EPS of $1.36 on revenue of $63.3 million. So, IIP (as the company is sometimes called) beat the revenue expectation, but fell slightly short of the earnings estimate. “Investors generally care more about the performance of adjusted FFO than that of earnings, so missing the Street’s EPS expectation won’t usually affect IIPR stock to the same degree that it might affect non-REIT stocks,” as I wrote last quarter when this same scenario played out. Adjusted AFFO growth was powerful in the quarter, as the above chart shows. 

The company remains in good shape from a balance sheet standpoint. It ended the period with about $253 million in cash, cash equivalents, and short-term investments, down from $406 million last quarter. Its debt load was 14% of its total gross assets, which total about $2.2 billion. This represents “a total annual fixed cash interest obligation of approximately $16.9 million, with no debt maturing in 2022 or 2023,” the company said in the release.

For context, in the fourth quarter of 2021, IIP’s revenue surged 59% year over year to $58.9 million. Earnings per share rose 25% to $1.14, and adjusted FFO per share jumped 42% to $1.85.

What happened with Innovative Industrial Properties in the quarter (and since the quarter ended through May 4):

It paid a quarterly dividend of $1.75 per share on April 14 to stockholders of record as of March 31, representing an increase of 33% from the year-ago period. Shares were yielding 4.71% as of the close of Wednesday’s regular trading session.
During the quarter, the company acquired four new properties, as I covered in my earnings preview. The company released this data in early April. These properties were in California, Massachusetts, New Jersey, and Pennsylvania. The company already owned properties in these states, so none of these purchases represented an entrance into a new state.
After the quarter ended through May 4, it made two more property acquisitions: one each in Maryland and Arizona. The company already owned property in both of these states. 

Here’s the current snapshot of Innovative Industrial Properties’ portfolio, taken directly from the earnings release:

As of May 4, 2022, IIP owned 109 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington [19 states], representing a total of approximately 8.1 million rentable square feet (including approximately 2.4 million rentable square feet under development / redevelopment), with a weighted-average remaining lease term of approximately 16.4 years.

Innovative Industrial Properties turned in another robust quarter, which included investors getting a juicy 33% year-over-year dividend increase.

Investors should learn more about the quarter and management’s broad outlook on the earnings call, which is scheduled for Thursday at 1 p.m. ET.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Innovative Industrial Properties. The Motley Fool has a disclosure policy.

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