This Under-The-Radar Dividend Stock Has An 8.2% Yield And Incredible Growth Potential

NewLake Capital Partners, Inc. NLCP is a real estate investment trust (REIT) that has been gaining attention from income-seeking investors due to its impressive 8.24% forward dividend yield and strong growth potential in the rapidly expanding cannabis industry. However, it’s important to note that the company’s stock currently trades on the OTC market, which carries additional risks compared to stocks listed on major exchanges.

NewLake Capital Partners focuses on providing real estate capital to state-licensed cannabis operators through sale-leaseback transactions and third-party purchases, as well as funding for build-to-suit projects. The company’s portfolio consists of 31 properties, including 14 cultivation facilities and 17 dispensaries, all leased to single tenants on a triple-net basis.

Dividends and Company Growth

NewLake Capital Partners’ forward dividend rate of $1.64 per share translates to a yield of 8.24%, making it an attractive option for income-focused investors. The company’s payout ratio of 86.7% indicates that the dividend is well-covered by its funds from operations (FFO). As the cannabis industry continues to grow, NewLake Capital Partners is well-positioned to benefit from increased demand for specialized real estate solutions.

The company’s FFO growth has been on a secular trend since its IPO in 2021, demonstrating its ability to capitalize on the expanding cannabis market. NewLake Capital Partners has also shown superior profitability metrics compared to its peers, with an AFFO (adjusted funds from operations) to total revenue ratio of 86.03%, which is 120.80% higher than the sector average.

Potential Catalysts for Further Growth

A significant catalyst for NewLake Capital Partners and the entire cannabis sector is the recent news that the U.S. Drug Enforcement Administration (DEA) will move to reclassify marijuana as a less dangerous drug. The DEA’s proposal would recognize the medical uses of cannabis and acknowledge it has less potential for abuse than some of the nation’s most dangerous drugs, moving it from Schedule I to Schedule III.

This historic shift in American drug policy could have wide-reaching effects on the cannabis industry. While marijuana would not be legalized outright for recreational use, the reclassification would reduce tax pressures on cannabis-producing companies and provide easier access to banking services, allowing for the necessary credit lines to invest in new and larger markets.

The DEA’s move, coupled with the potential for continued legalization and easing of restrictions, presents massive untapped potential for NewLake Capital Partners in both new markets that have already legalized cannabis and those that may legalize in the future. The company has ample room for expansion into legal markets adjacent to its current operations, such as New Mexico, Colorado, Oregon and Washington in the West, and Michigan, New York, Maine and Virginia in the Midwest and Northeast regions. These states represent a combined population of over 61 million potential customers.

Risks to Consider

While NewLake Capital Partners presents an attractive opportunity for income and growth, investors should be aware of the risks associated with investing in OTC stocks. These risks include lower liquidity, less transparency and potential volatility compared to stocks traded on major exchanges.

Additionally, despite the DEA’s proposed reclassification, the cannabis industry is still subject to evolving regulations and legalization efforts, which could impact the company’s growth prospects. Competition from larger players in the cannabis REIT space, such as Innovative Industrial Properties Inc., may also pose a challenge for NewLake as it seeks to expand its market share.

Another High-Yield Income Play

For investors seeking additional high-yield income opportunities, the Cityfunds Yield Fund is worth considering. This fund targets an 8% APY and provides investors with stable cash flow backed by real estate assets. By investing in a diversified pool of collateralized real estate loans, including home equity-backed notes and short-term mortgage notes, the Cityfunds Yield Fund aims to generate consistent interest income for its investors.

The Cityfunds Yield Fund offers quarterly distributions, which can be reinvested to compound returns or paid out directly to investors’ bank accounts. With a five-year term and liquidity options after 12 months, this fund provides a balance between liquidity and long-term growth potential, making it an attractive option for income-focused investors looking to diversify their portfolios.

Click here to see how much you could be earning with the Cityfunds Yield Fund. 

The Bottom Line on This Under-The-Radar Opportunity

NewLake Capital Partners presents a compelling opportunity for investors seeking high dividend yields and exposure to the growing cannabis industry. With its impressive yield, strong profitability metrics, and potential for expansion, the company is well-positioned to benefit from the continued legalization and easing of restrictions on cannabis, especially in light of the DEA’s proposed reclassification of marijuana.

However, investors should carefully consider the risks associated with investing in OTC stocks and the evolving regulatory landscape of the cannabis industry. As with any investment, thorough research and due diligence are essential before making a decision.

For those looking to diversify their income streams, the Cityfunds Yield Fund offers another attractive option, providing stable cash flow backed by real estate assets and a targeted 8% APY.