The £10 Weekly Challenge: Exploring IIPR’s Dividends

As advanced some days ago, I will be starting a low cost investment challenge on 2025, and although today is not yet 2025 as promised, I decided to start my challenge a little bit earlier for my ‘£10/WK Dividend Pie’, to be just on time for the ex-div date of my first stock purchase on this pie. Let me show you what has been my first choice and why I chose it.

Innovative Industrial Properties, Inc. (IIPR) is a real estate investment trust (REIT) specializing in the acquisition and management of specialised industrial properties leased to state-licensed operators for regulated cannabis facilities. As of December 23, 2024, IIPR’s stock price is $73,66 after losing over 20% of their value last week due to the default of one of their tenants. However, we see this as a great opportunity for ourselves to get into this stock as a discounted price.

Innovative Industrial Properties Inc (IIPR) Chart

Dividend Overview

On this £10 a week challenge, on the dividend pie the focus will be as its name says, the stocks with healthy dividends. Reviewing Innovate Industrial Properties, IIPR has demonstrated a strong commitment to returning value to shareholders through consistent and growing dividends. The company pays dividends quarterly, with a current annualized dividend of $7.60 per share, yielding approximately 10.32%.

Dividend Growth

Since its first dividend payment in 2017, IIPR has exhibited impressive dividend growth. You can check yourself how IIPR raises its dividend The quarterly dividend has increased from $0.15 per share in June 2017 to $1.90 per share in December 2024, representing a compound annual growth rate (CAGR) of approximately 70%.

Dividend Security

IIPR, as a Real Estate Investment Trust (REIT), is required by law to pay out at least 90% of its taxable income to shareholders. This rule helps ensure that the company consistently pays dividends to its investors. The company mainly invests in long-term properties leased to businesses in the regulated cannabis sector. These leases are “triple-net,” meaning the tenants are responsible for most costs, such as property maintenance and taxes. This setup provides IIPR with a steady income, which boosts the security of its dividend payments.

However, investors should note the recent news regarding one of IIPR’s tenants, Parallel, defaulting on its lease obligations. This tenant accounts for a significant portion of IIPR’s rental income. While the company has other tenants and properties that mitigate the impact, this default underscores the inherent risks in leasing properties to companies in the nascent and volatile cannabis industry. IIPR’s ability to quickly re-lease the property or find other solutions will be critical to maintaining its revenue and dividend stability.

Upcoming Dividend

The rush to purchase the stock before the challenge official start date is the next ex-dividend date, which is December 31, 2024, with a dividend payment of $1.90 per share scheduled for January 15, 2025, so we will be just on time to grab our first portion of the dividend.

Considerations for our Investment Challenge

Incorporating IIPR into our “£10-a-week investment challenge” could provide a high-yield dividend stock with a history of significant dividend growth. However, it’s important to consider the unique risks associated with the cannabis industry, including regulatory changes and market volatility. Our plan is to diversify our portfolio and this will be only one of the many stocks to purchase on this 2025 Investment challenge.

Final thoughts

IIPR’s substantial dividend yield and consistent growth make it an attractive option for our dividend-focused investment. Its specialised niche in the cannabis industry offers both opportunities and challenges of becoming also a growth stock.

Please note that investing in individual stocks carries risks, and it’s advisable to consult with a financial advisor to ensure alignment with your investment goals and risk tolerance, this is merely a challenge with our own money.