Dank Dividends: 3 Cannabis REITs Offering High Yields
Cannabis real estate investment trusts (REIT) could see higher highs on a few key catalysts.
For one, hedge fund manager Dougie Kass of Seabreeze Capital recently said the Food and Drug Administration (FDA) would soon reschedule cannabis to a less restrictive category. Two, there is growing speculation cannabis could be favorably mentioned as we near the presidential election this year.
Three, 88% of the American public wants to see cannabis legalized, as noted in a recent Pew Research poll. “The use and possession of marijuana is illegal under U.S. federal law, but about three-quarters of states have legalized the drug for medical or recreational purposes. The changing legal landscape has coincided with a decades-long rise in public support for legalization, which a majority of Americans now favor,” they added.
Four, Germany just relaxed cannabis laws, which could lead to a potential domino effect of legalization across Europe. Should we see even more bullish news, some of the best cannabis REITs to buy and hold are those with respectable high yields.
Innovative Industrial Properties (IIPR)
The last time I mentioned Innovative Industrial Properties (NYSE:IIPR), it traded at around $94 a share on March 15. Shortly after, it would hit a high of $105.01 before backing off to $98.30.
Now, the commercial mortgage REIT that provides financing to the cannabis industry and yields 7.41% is again a buy. It’s set to pay out a $1.82 dividend today. If you missed this one, don’t worry. Another should be on the way soon.
One of its key catalysts should be cannabis rescheduling. The moment this happen, it could cut taxes for cannabis operators, which includes IIPR tenants, which would also help improve overall cash flow. In addition, should we see further support for the SAFER Banking Act, it would significantly improve access to banking capital.
Recent earnings haven’t been too shabby either. Fourth quarter funds from operations (FFO) was $2.07, beating expectations for $2.02. Revenue of $79.2 million was also above estimates for $76.5 million. That’s also up nicely from the $70.5 million posted a year ago. It also collected 100% rent in the quarter as compared to 97% in the prior quarter.
AFC Gamma (AFCG)
With a yield of 16.58%, AFC Gamma (NASDAQ:AFCG) is another one of the hottest cannabis REITs to buy and hold, especially with multiple catalysts.
Earnings have been solid here, too. In its most recent quarter, it posted EPS of 49 cents, which was in line with expectations. Net interest income of $15.97 million — which was down nearly 19% year over year — beat by $60,000.
Better, TD Cowen recently reiterated a buy rating on the AFCG stock, with a price target of $15. All on news AFC Gamma will spin off its commercial real estate business into an independent REIT.
“The upcoming spin-off will create two specialized debt capital providers, with AFC Gamma focusing on the cannabis sector and SUNS [Sunrise Realty Trust] targeting CRE [commercial real estate] in the southern United States,” as noted by Investing.com.
Lake Street analysts also have a buy rating on the stock, with a price target of $18 a share.
NewLake Capital Partners (NLCP)
We can also look at NewLake Capital Partners (OTCMKTS:NLCP), which yields 9.01%.
The REIT, which provides real estate capital to licensed cannabis operators through sale-leaseback transactions and owns a portfolio of 31 properties comprised of 14 cultivation facilities and 17 dispensaries. All of which should also benefit from multiple cannabis catalysts.
Even better, in the company’s most recent quarter, funds from operations (FFO) came in at 51 cents, which beat by 6 cents. Revenue of $13.02 million — up 6.4% year over year — beat by $1.61 million. It also collected 100% of contracted rent in the quarter.
“During a very challenging environment for the cannabis industry, we were able to grow our dividend distributions by 9.0% year-over-year and for the first quarter of 2024 raised our quarterly dividend from $0.40 to $0.41 per share,” said the company in a recent press release.
Analysts at Compass Point also upgraded the NLCP stock to a buy rating from a neutral rating, with a price target of $18.25.
On the date of publication, Ian Cooper did not hold (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
