In the turbulent landscape of the U.S. cannabis sector, Chicago Atlantic Real Estate Finance (REFI) has emerged as a beacon of stability, offering investors consistent returns amidst market volatility. This strategic resilience is highlighted in recent equity research by Pablo Zuanic of Zuanic and Associates.
Financial Strength and Growth
During the second quarter of 2024, REFI’s loan book expanded to a robust $382 million, achieving an impressive 8% compound annual growth rate over the past 24 months. While the broader market experienced downturns, REFI’s stock remained relatively stable, exhibiting minimal decline in contrast to the 13.4% drop in the MSOS ETF, a testament to its strong market position.
Consistent Dividends and Returns
REFI has consistently paid dividends, with an annualized yield currently standing at 13.6%. This significantly surpasses the 10-year Treasury rates, reflecting the company’s commitment to providing value to its investors even in volatile market conditions. Zuanic emphasizes that REFI’s dividend strategy underscores its robust approach to value return amidst market fluctuations.
Comparative Advantage
Compared to its peers, REFI commands a 7% premium to book value. This premium is justified by its exceptional growth, stable dividends, and a portfolio yield to maturity of 18.7%, making it an attractive proposition compared to other mortgage REITs, particularly those outside the cannabis sector.
Investment Outlook and Growth Potential
Zuanic maintains an ‘Overweight’ stance on REFI, citing the potential for further growth fueled by anticipated regulatory changes and expansion within the U.S. cannabis industry. He projects a conservative 10% annual growth in the loan book and anticipates dividend increases, reinforcing REFI’s appeal as a high-yield, low-volatility investment.
Zuanic concludes that REFI is a prudent investment choice for investors seeking stability and consistent returns in the cannabis finance sector, supported by strategic management and solid financial fundamentals.
