IIPR - Innovative Industrial Properties Stock Just Tanked. Here's What to Do About It.
On Jan. 18, Innovative Industrial Properties (NYSE: IIPR) dropped a bombshell with its operating and investment activity update for the fourth quarter and full year 2022. It had only collected 92% of its rent payments for January, indicating that three of its tenants are having trouble paying up. As a result, since the announcement, its shares are down by more than 24%.
Now, the company's difficulties are clearly much larger than in July 2022, when its tenant Kings Garden defaulted, spooking investors. That issue was eventually settled out of court, but the downturn in the cannabis industry is now an undeniable threat to shareholders, and it might be hard to deal with in the near term. So is it time for shareholders to consider cutting losses, or is this stock still ripe for buying with plans for a long-term hold? As it turns out, the answer to both those questions is yes, and here's what to do about it.
As a real estate investment trust (REIT) , Innovative Industrial Properties makes money by doing sale-leaseback transactions in which it pays cash for cannabis cultivation real estate and then inks a lease for the space's former owner, turning it into a rent-paying tenant. Tenants are on the hook for everything from utilities to maintenance to facility improvements, so the ongoing costs for IIP to continue renting a property are practically nil, enabling it to generate trailing-12-month net income of more than $139.3 million. Then, the company distributes whatever income is left over to investors via its dividend, which presently has a forward yield above 8%.
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Innovative Industrial Properties Stock Just Tanked. Here's What to Do About It.