Chicago Atlantic Real Estate Finance REFI stands out in the cannabis capital providers and mortgage REIT (mREIT) sectors due to its premium valuation, impressive dividend yield, and robust growth track record.
Pablo Zuanic, a senior equity analyst, noted in a recent report, "Of the six publicly listed cannabis capital providers, five are NASDAQ listed, being NLCP NLCP the exception. However, some may not currently provide the right comp due to poor liquidity, size, and relative newness."
Performance And Valuation Comparison
REFI trades at a 3% premium to its book value, reflecting strong investor confidence in its growth prospects.
This stands in contrast to other cannabis capital providers such as AFC Gamma, Inc. AFCG, which trades at a 20% discount to its book value, and Innovative Industrial Properties Inc. IIPR, which trades at a 57% premium. Its consistent performance and strategic management justify REFI’s premium.
Dividend Yield
One of REFI’s most attractive features is its 12.2% dividend yield. This is significantly higher than its peers, with AFCG offering a 15.8% yield and IIPR at 6.8%.
The high dividend yield, combined with a solid dividend coverage ratio of 117% over the last five quarters, underscores REFI’s ability to generate stable returns for investors.
Additionally, REFI’s yield is bolstered by special cash dividends paid in the past two December, contributing to an annualized dividend yield of 14.1%.
"AFCG, SHFS SHFS, and SSIC SSIC trade at close to a 20% discount to book value, while NLCP now trades at par," Zuanic continued. "IIPR trades at a 57% premium, according to FactSet. In terms of dividend yield, AFCG is the outlier at close to 16%, followed by REFI at 12.2% (IIPR over 6%; NCLP 8.7% taking the latest DPS of 43 cents; SSIC 8.7%),” Zuanic wrote.
Read Also: Brick-And-Mortar Investments Build Cash Flow And 11% Price Uptick For This Cannabis Stock
Leverage And Risk Management
REFI's leverage ratio increased to 28% in March 2024 from 14% a year earlier, indicating its strategic use of debt to fuel growth.
Despite the increase in leverage, REFI maintains a conservative risk profile, with 60% of its loan book rated in the top two risk categories. This disciplined approach to risk management further enhances its appeal to investors.
Growth Track Record
According to Zuanic, REFI’s growth track record is another distinguishing factor. Despite the overall market volatility, the company's loan book increased by about $50 million year-over-year to $376 million by the end of March 2024.
This growth is supported by a diverse portfolio spread across 15 states, with significant exposure in Michigan, Maryland, and Florida.
Market Position And Outlook
In the broader context, mREITs have generally underperformed, with most trading at significant discounts to book value and offering dividend yields in the mid to high teens.
However, REFI's stronger growth track record, higher yield-to-maturity, and the potential for better growth opportunities in the cannabis sector explain its relative premium.
For Zuanic, its strategic management and conservative risk approach provide a stable foundation for continued investor confidence and attractive returns.
Top Stock Performers In The Last 12 Months
In addition, Zuanic provided stock performance data from FactSet.
Industrial REITs And Lenders To The Cannabis Industry
- Innovative Industrial Properties Inc (IIPR): 47%
- NewLake Capital Partners, Inc. (NLCP): 44%
- Silver Spike Investment Corp. (SSIC): 38%
- Industrial Logistics Properties Trust ILPT: 12%
- LXP Industrial Trust LXP: 8%
Top MSO Stock Performers In The Last 12 Months
- Grown Rogue International Inc. GRUSF: 221%
- Goodness Growth Holdings, Inc. GDNSF: 185%
- Trulieve Cannabis Corp. TCNNF: 133%
- Ayr Wellness Inc. AYRWF: 118%
- Glass House Brands Inc. GLASF: 115%
Top Canadian LP Stock Performers In The Last 12 Months
- Nova Cannabis Inc. NVACF: 97%
- High Tide HITI: 72%
- Canopy Growth Corp. CGC: 61%
- Cresco Labs Inc. CRLBF: 46%
- SNDL SNDL: 37%
Read Next: Cannabis Property Funds Control Over $4.5B: Are Investors Missing Out On High Dividend Stocks?
These issues will be a hot topic at the upcoming Benzinga Cannabis Capital Conference in Chicago this Oct. 8-9. Join us to get more insight into what the wave of weed legalization means for the future of investing in the industry. Hear directly from top executives, investors, advocates, and policymakers. Get your tickets now before prices go up by following this link.
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© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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