Forget Dividend Kings: It’s the Best Income Equity for Your Portfolio

The kings of dividends are generally excellent income investments. These companies have a proven track record, having increased their dividend payments for at least 50 consecutive years. That said, technically all a company would have to do to maintain such a growth streak would be to increase the dividend by a minimal amount – say 0.1%. Anything that increases performance year over year will count.

So while these types of investments can offer stability, they may not be the best options if you want to maximize your dividend income (and total earnings) over the years. High growth stocks Innovative industrial properties (NYSE: IIPR) may be a much better option for investors, as not only are its payouts increasing at impressive rates, but its profits as well.

Image source: Getty Images.

Innovative Industrial almost doubled its payments in 2020

Today, Innovative Industrial pays a quarterly dividend of $ 1.24, more than three times the $ 0.35 it distributed just two years ago. In 2020, he paid $ 4.23 per share in dividends. That’s 94% more than the $ 2.18 it paid in 2019. For many dividend-paying stocks, it will take several years (in some cases decades) for their payouts to double in value. Here’s a look at how businesses with much longer streaks increased their payouts, including Coca Cola, 3M, and Lowe’s:

Society Current yield

Quarterly Dividend (Current)

Quarterly dividend (5 years ago)

Compound annual growth rate Years to double
Coca Cola 3.3% $ 0.42 $ 0.35 3.71% 19
3M 3.3% $ 1.48 $ 1.11 5.92% 12
Lowe’s 1.5% $ 0.60 $ 0.28 16.47% 5

Data source: Company deposits.

Innovative Industrial is not on this list because it has not paid dividends for five years. But since its IPO in December 2016, it has already increased its payments nine times. Its 2.9% dividend yield is not far below the payments from Coca-Cola and 3M and is still well above the S&P 500 average of about 1.6%.

As you can see, even a fast growing dividend like Lowe’s will take around five years to double, assuming it continues at its current rate. But for Coca-Cola, you’ll probably wait a few decades for your recurring income to double.

Growth at slow and modest rates is obviously more sustainable than sharply increasing payments each year. But one of the reasons to remain optimistic about Innovative Industrial’s dividend is that the company is in an incredibly high growth industry.

There is still a lot of growth to come for Innovative Industrial

Amid the pandemic, global cannabis sales topped $ 21 billion in 2020, growing 48% from the previous year. And analysts at cannabis research firm BDSA predict those numbers will almost triple by 2026, to $ 55.9 billion. Innovative Industrial is benefiting from this growth because, as more companies look to sell cannabis, the demand for grow spaces will increase, which this company offers through sale-leaseback agreements.

February 24, Innovative Industrial published its results for 2020, and revenue of $ 116.9 million for the full year increased 162% from 2019. Profits totaling $ 64.4 million grew at an even higher rate of 191%. With strong and rapidly growing earnings, Innovative Industrial will have more room to continue increasing its dividend payments. And the opportunities will only appear as the cannabis industry grows.

Acquiring more locations is a key part of the company’s growth, and as of December 31, Innovative Industrial had 66 properties in its portfolio in 17 states. That’s up from a year ago, when she owned 46 properties in 14 states. With more and more states considering cannabis reform, including New York City and New Mexico, there are plenty of growth opportunities for the business in the near future.

In November, voters in four states chose to legalize recreational marijuana. Today, 36 states allow medical marijuana, and there could be 16 that allow recreational use, as Virginia is in the process of legalizing. (The number could drop to 15, however, as a South Dakota judge recently challenged that state’s poll results.)

Innovative Industrial is a great long term buy

As a real estate investment company, Innovative Industrial must return at least 90% of its profits to investors. And given that its profits are only increasing and there is a ton of additional growth underway, there is little reason to doubt that the company will continue to increase its dividend significantly in the future. Now, I wouldn’t expect to see those payouts double every year, but he’s certainly in an excellent position to remain among the top dividend growth stocks today.

And not only does its dividend offer incredible potential, but its earnings over the past year have also eclipsed all of the other stocks mentioned above:

IIPR Chart

IIPR given by YCharts

Don’t let the cannabis industry (which can seem risky at times) or Innovative Industrial’s relatively short dividend payout period scare you off, because it is a great investment and one of the safest. cooking pots you can buy.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Lucille Thompson

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