NewLake Capital Partners: A Promising Cannabis REIT with High Growth Potential
Investment Thesis
NewLake Capital Partners (NLCP) is a specialized REIT focused on the cannabis industry. The company has demonstrated an impressive ability to generate high margins while maintaining a generous dividend yield despite its relatively young age. With a high-growth market and access to a large customer base, NLCP is poised to continue its growth trajectory.
A Cannabis REIT
NLCP’s portfolio consists of 1.6 million square feet of cannabis industry properties leased to tenants in both recreational and medical use businesses. The company employs a traditional triple-net lease structure, similar to other REITs in the market.
A Green and Growing Market
The cannabis industry in the United States is projected to experience significant growth in the coming years. This positions NLCP as a growth company in a rapidly expanding sector, offering both upside potential and associated risks.
Strong Financial Performance
NLCP has consistently delivered strong financial results, with steady growth in funds from operations (FFO) and adjusted funds from operations (AFFO). The company’s profitability and efficiency are evident in its high AFFO / total revenue ratio, which is significantly above the industry average. NLCP’s low AFFO payout ratio indicates its commitment to reinvestment and future growth.
Dividend Yield and Coverage
NLCP offers an attractive annual dividend yield of 8.69%, which is well-covered by its FFO per share. This positions the company among the top REITs in terms of dividend yield and coverage.
Growth Opportunities
NLCP has identified significant growth opportunities in both new and existing markets. The company plans to expand into states where cannabis is legal or likely to be legalized in the future. Additionally, a potential rescheduling of cannabis at the federal level could provide further tailwinds for the industry and NLCP in particular.
Competition
While the cannabis REIT market is growing, NLCP faces competition from larger players such as Innovative Industrial Properties. However, NLCP’s strong financial performance and strategic expansion plans position it to compete effectively.
Conclusion
NewLake Capital Partners is a compelling investment opportunity with a combination of high growth potential, a generous dividend yield, and a strong financial track record. The company’s focus on the cannabis industry, its access to a large and expanding market, and its strong profitability and efficiency make it an attractive choice for investors seeking exposure to the growing cannabis sector.
