Innovative industrial properties (NASDAQ:AMD) is a REIT in its own right. Of course, one should not be dismissive of the cannabis segment as a growth market and at the same time know the starting point. A good 100 properties are not very diversified. But that’s exactly what makes this real estate investment so appealing.
Charts for the values in the article
Now there is another exciting news from Innovative Industrial Properties. The management of the REIT has again increased the dividend. Despite the cheap valuation, it has an adjusted price-to-FFO ratio of just 11% and is now close to an 8% yield. In fact, I continue to believe that this development is not necessarily priced into the valuation.
Innovative Industrial Properties: The Dividend Rise!
As we can see at Innovative Industriejendomme, the management has turned things up a bit again. Management now wants to pay out $1.80 per share to investors for the fall quarter. At least that’s a slight increase from the previous quarterly dividend of $1.75.
Recently, however, there has been a quarter with just stagnant dividends. It’s also not unusual for cannabis REITs. But there is usually some dividend growth after all. Or at least there used to be. Now cannabis REITs and the entire industry are finally facing the challenge of inflation and rising interest rates.
Anyway, Innovative Industrial Properties’ total dividend is now $7.20. At least fictionally extrapolated to a year. On the other hand, with the current share price of $90.13, we as investors are getting an almost 8% dividend. Again, we also want to pursue the question: Is this possibly too favorable an assessment?
Risks and opportunities…
Of course, Innovative Industrial Properties doesn’t just have a favorable opportunity. Nevertheless, the investment thesis is relatively simple: If the previous portfolio continues to deliver solidly and can always pay at least a stable dividend, I expect a total return that will beat the market. A little growth and dividend growth like we are doing right now can increase the dividend potential significantly.
However, there have been a few things lately that we as investors should be aware of. For example, that a tenant has run into problems, which can lead to a loss of rent and possible vacancies. It is of course the management’s job to be prepared for this and to compensate for it. But the market for cannabis and consumer goods is also changing due to inflation and rising interest rates.
Therefore, there may also be less growth due to the interest rates. Or, at worst, additional vacancies if other cannabis companies run into trouble. Nevertheless: With an 8% yield and a price-to-FFO ratio currently around 11, the valuation is pretty cheap. This may be a long-term option. In any case, I see the dividend increase as a positive sign.
The article Innovative Industrial Properties: Dividend Increase! Almost 8% yield! first appeared on The Motley Fool Germany.
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Vincent owns shares in Innovative Industrial Properties. The Motley Fool owns shares of and recommends Innovative Industrial Properties.
Motley Fool Germany 2022