Investors look to real estate investment trusts (REITs) for portfolio diversification. These investments offer exposure to a range of properties, and they potentially generate steady income through dividends. REITs can also provide a hedge against inflation, and historically they have delivered competitive long-term returns. With inflation still lingering and concerns that it may get worse, and with the drivers of the strong market growth of the past two years now looking shaky, REITs could be appealing choices for worried income investors.
Let’s take a look at some REIT stocks for which analysts have big expectations for the next year or more.
| Stock | Mean Target | Upside |
| Americold Realty Trust Inc. (NYSE: COLD | COLD Price Prediction) | $27.97 | 30.9% |
| Global Medical REIT Inc. (NYSE: GMRE) | $10.82 | 36.9% |
| Global Net Lease Inc. (NYSE: GNL) | $9.40 | 30.2% |
| Innovative Industrial Properties Inc. (NYSE: IIPR) | $109.50 | 63.3% |
| Kite Realty Group Trust. (NYSE: KRG) | $29.90 | 28.3% |
| Lineage Inc. (NASDAQ: LINE) | $78.71 | 36.4% |
| LXP Industrial Trust (NYSE: LXP) | $10.80 | 33.0% |
| Safehold Inc. (NYSE: SAFE) | $26.00 | 53.3% |
So, as far as Wall Street is concerned, Innovative Industrial Properties has the greatest potential upside in the coming year of these stocks. Does that mean that its shares are undervalued? Or perhaps one overzealous analyst has skewed the mean?
Why Invest in Innovative Industrial Properties?
A big dividend and high expectations.
Innovative Industrial Properties stock is up over 270% from its 2016 initial public offering (IPO) share price. Shares traded for almost $290 a share in late 2021. However, uncertainty in the industry in which its tenants operate has resulted in tenant defaults and declining property management fees. On the other hand, the company offers about an 11.1% dividend yield. The stock is up marginally since the beginning of this year, and the question is where it may be headed from here. What does Wall Street expect?
Innovative Industrial Properties, the Company
Innovative Industrial Properties is a self-advised Maryland corporation that is focused on the acquisition, ownership, and management of specialized properties leased to experienced, state-licensed operators for regulated cannabis facilities. The company has elected to be taxed as a real estate investment trust since the end of 2017.
As of September 30, 2024, the company says it owned 108 properties comprising an aggregate of around 9.0 million rentable square feet in 19 states. It also says that, according to BDSA, regulated cannabis sales are estimated to grow to $46 billion by 2028, over 50% more than 2023 estimated regulated sales of $30 billion.
Innovative Industrial Properties headquarters are in San Diego. The company was founded in December of 2016 and went public at that time. The company competes with or is similar to, among others:
- Cushman & Wakefield PLC (NYSE: CWK)
- GrowGeneration Corp. (NYSE: GRWG)
- Industrial Logistics Properties Trust (NASDAQ: ILPT)
- LXP Industrial Trust
- NewLake Capital Partners
- Plymouth Industrial REIT Inc. (NYSE: PLYM)
In December, a major tenant defaulted on rent payments for some properties. However, the new U.S. president has expressed public support for marijuana banking reform, and his choice for health and human services secretary is pro-cannabis. Still, the company fell short of forecasts in its third-quarter report, and the tenant default is likely to be felt in the next report, expected in February.
Community Healthcare Trust, the Stock
Is the stock ready to bounce back?
The share price sank to a 52-week low of $62.45 after news of the tenant default. It is up more than 2% year to date, edging out the S&P 500 in that time. While the $109.50 consensus price target is less than the 52-week high, analysts overall still see plenty of room to run in the next year. However, only one of eight analysts who cover the stock recommends buying shares, and that with a Strong Buy rating. BTIG and Compass Point each downgraded the stock from Buy to Neutral in the wake of the default news.
Innovative Industrial Properties stock is popular with some hedge funds. Institutional investors hold about 73% of the shares. BlackRock and Vanguard are beneficial owners, while State Street also has a notable stake. Less than 2 million shares, or about 6% of the float, are held short.
Wall Street expectations for where the stock goes in the next 52 weeks vary widely but are all positive.
| Low target | $70.00 | 4.4% |
| Mean target | $109.50 | 63.3% |
| High target | $179.00 | 167.0% |
Despite caution in terms of ratings and earnings estimates, Wall Street so far seems optimistic when it comes to price targets. The company will need to show in its upcoming results that it is positioned to withstand the tenant default and other industry uncertainties. Analysts may be waiting to see how things shake out in Washington before boosting ratings.
For prospective investors, Innovative Industrial Properties stock may be a bit speculative for now, but the payoff could be quite generous.
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