Innovative Industrial Properties

IIPR

Market cap $1.4B

Innovative Industrial Properties (IIPR) has been upgraded to a Zacks Rank #2 (Buy), reflecting growing optimism about the company's earnings prospects. This might drive the stock higher in the near term.

The push for better cannabis reform is and seems to be an ongoing battle. Now, from the time the first state legalized cannabis, there has been tremendous growth and opportunity. This led other states and global regions to take action and build an entire cannabis industry. This has allowed investors to enter the space and find cannabis companies that are publicly traded. Investing in top marijuana stocks is the quickest way to get involved from the sidelines.

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

The ancillary cannabis sector continues to draw new interest as the industry navigates a shifting landscape in late 2025. Many investors remain cautious about traditional plant-touching companies because they still face heavy tax burdens, banking restrictions, and regulatory uncertainty. However, ancillary operators avoid many of these challenges. They support the cannabis market through real estate, financing, and essential infrastructure rather than handling the product directly. Consequently, these companies often show steadier revenues, stronger margins, and healthier long-term fundamentals than some retailers or cultivators.

Innovative Industrial Properties has fallen by around 54% from its 1-year high as shareholders, skittish about a dividend cut, have fled the common shares. The REIT has seen its dividend yield sell to 14.8% with coverage negative at 84%, a nominal dividend shortfall of around $8.6 million. IIPR expects to resolve the bulk of its tenant defaults over the next 3 to 9 months.

Innovative Industrial Properties offers a compelling 14% dividend yield, supported by a conservatively leveraged balance sheet and net lease model. IIPR faces ongoing tenant struggles and sector headwinds, but diversification into life sciences and a strong balance sheet provide resilience. Potential regulatory reform, such as cannabis rescheduling, could serve as a major catalyst, while the stock already prices in a lot of the worst-case scenarios.

The continuous evolution and future outlook on legal cannabis is what keeps investors in the game. After a long battle to see any true stable trading momentum, it has for some time worked the same for most marijuana stocks. It often comes from positive news on federal reform or when a company achieves a significant milestone in business or reports strong financial results.

Innovative Industrial Properties specializes in leasing properties to regulated cannabis operators, offering a unique REIT investment profile. IIPR.PR.A preferred stock stands out with a 9% yield, outperforming peers and offering better protection against sector-specific risks than the common stock. Despite tenant payment issues impacting revenue, IIPR maintains a strong balance sheet, low debt, and robust fixed charge coverage ratios.

Innovative Industrial Properties, Inc. ( IIPR ) Q3 2025 Earnings Call November 4, 2025 12:00 PM EST Company Participants Eli Kanter Alan Gold - Executive Chairman Paul Smithers - President, CEO & Director Ben Regin - Chief Investment Officer David Smith - CFO & Treasurer Conference Call Participants William Catherwood - BTIG, LLC, Research Division Aaron Grey - Alliance Global Partners, Research Division William Kirk - ROTH Capital Partners, LLC, Research Division Alexander Goldfarb - Piper Sandler & Co., Research Division Presentation Operator Good day, and welcome to the Innovative Industrial Properties, Inc. Q3 2025 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.