Reaching a high with cannabis
Barbara Eisner Bayer: I'm closer to retirement than many of my colleagues, so I like to play things a little safer by holding on to my long-term winners and not necessarily shooting for the newbie investing stars any longer. However, when I found a company that fit in nicely with my goals of capital preservation with a healthy dividend, I took a bite of the company that turned out to be my biggest winner of 2020: Innovative Industrial Properties (IIPR 0.38%), a real estate investment trust (REIT) in the cannabis industry that was up 119.5% for 2020 (as of Dec. 11).
As a child of the Woodstock generation and long-time resident of that town in upstate New York, I've been interested in an investment in marijuana for a long time. But pot isn't legal at the federal level, which makes investing in the cannabis sector a challenging proposition.
But IIPR changed my mind. Innovative doesn't buy or sell marijuana. Instead, it purchases properties from operators in the pot industry and leases them back to the same operators. This has been a lifesaver for these companies as it provides them with cash, which is sorely needed until cannabis becomes legalized nationally.
Over the last three years, Innovative's trailing-12-month revenue was up more than 1,400% and earnings have delivered a mouth-watering 3,600% return during the period. So I guess it's not all that shocking that it came out on top of my portfolio. And the industry itself is gaining steam: Several states voted to legalize both recreational and medical marijuana on Election Day, and now, it's legally available in some form in 36 states.
And what about that dividend? REITs are required by law to return 90% of their taxable income as dividends to their shareholders. Innovative's is currently north of 3%, which may be small for a REIT. But considering the company's growth prospects -- it's on track to double the number of properties it owns in just 3 1/2 years -- it feels a lot larger.
I was somewhat surprised to see that IIPR was my biggest winner and beat my other racehorse Amazon.com (AMZN 1.80%) by a nose. I plan to hold onto this fantastic company well into retirement, while I keep my eye on the price and will scoop up more shares if a buying opportunity presents itself.
