If You Invested $10,000 In NewLake Capital Partners Right After Its IPO, Here's How Much You Would Be Making In Dividends Today

It's impossible to predict where a stock's price will go after its initial public offering (IPO). However, if a new company substantially and frequently raises its dividend, it's usually a positive sign for future performance.

Let's take a look at one real estate investment trust (REIT) in a volatile industry that has raised its dividend several times in just a few years, despite losing share price:

NewLake Capital Partners Inc. NLCP is an internally managed specialized industrial REIT in New Canaan, CT, with 31 properties totaling 1.6 million square feet across 12 states. NewLake Capital Partners specializes in triple-net leasing to cannabis companies and provides capital to them when necessary. One unique aspect of NewLake is that it only has $4.00 million in total debt versus $21.55 million in cash. This is highly unusual for a REIT. 

NewLake was founded in 2019 and went public with its IPO in August 2021. Its tenants include the largest companies in the cannabis industry, such as Curaleaf, Cresco Labs and Truelieve. As of March 2024, it had a perfect 100% occupancy rate, with an average of 14.3 years remaining on its lease terms and 2.6% annual rent escalations on 15-20 year leases. 

Over the past three months, NewLake has shared several pieces of positive news with its investors:

On March 11, along with the release of its Q4 operating results, NewLake Capital Partners raised its quarterly dividend from $0.40 per share to $0.41 per share. CEO Anthony Coniglio noted that year-over-year AFFO and revenue growth enabled NewLake to increase the dividend for a second consecutive quarter. 

On April 2, the Florida Supreme Court approved an initiative to legalize recreational marijuana in Florida through a referendum on the November ballot. NewLake has one property leased to Curaleaf Holdings in Florida which will stand to benefit if the referendum is passed. Several other tenants of NewLake have a presence in Florida as well. 

More good news for cannabis companies was forthcoming on May 1 when the U.S. Drug Enforcement Administration (DEA) was said to be moving toward reclassifying marijuana from the Schedule I group to the less regulated Schedule III group. The White House Office of Management and Budget must still review the proposal; following that, an administrative judge will review it again.

On May 9, NewLake announced its Q1 2024 operating results. FFO of $0.50 beat the estimate of $0.46 and its FFO of $0.44 in Q1 2023. Revenue of $12.60 million beat the consensus estimate of $19.98 million and topped Q1 2023 revenue of $11.40 million. 

NewLake Capital’s IPO was in August 2021. If you invested $10,000 at the opening bell on the trading following the IPO, you would have purchased 338.98 shares at $29.50 per share.

The first quarterly dividend of $0.12 per share was paid on Sept. 29, 2021. Since then, NewLake has raised its dividend seven times and now pays $0.41 per share. The present annual dividend yield is 8.18%. 

Like all cannabis-related stocks, NewLake Capital has been volatile since its IPO. An investor who collects dividends would have experienced a total return of -21.29 % over that time frame. An original investment of $10,000 would now only be worth $7,870.38.

However, if an investor reinvested the dividends, the return of -17.31%, while not great, would still be better. The investor would now own 426.91 shares and the $10,000 investment would now be worth $8,269.05. 

Although the share price has declined, note that income investors who can tolerate price swings and have no plan to sell would have collected $3.85 per share in dividends in less than three years. The dividend growth of 241% is a remarkable achievement in such a short period.

After the recent announcement, the forward annual dividend of $1.64 now yields 8.4667%. While some REITs with that much yield might be suspect, NewLake Capital's two consecutive dividend hikes should reassure investors that a dividend cut is highly unlikely.

In addition, the Total Debt/Equity of only 0.97% is an investor's dream. Also, the present dividend yield is 1.2% above NewLake's four-year average. Although the payout ratio of 86% is a bit high, without any substantial debt, there should be no problem covering its dividend.

The present Price/FFO ratio is only 9.98, suggesting the stock is undervalued against the Sector Median of 12.65. However, additional dividend hikes are unlikely until NewLake grows its FFO further. 

The bottom line for NewLake Capital Partners is that given its share price, dividend yield, lack of debt, favorable political winds and earnings growth, this could be an ideal time to accumulate shares. A few caveats should be noted- NewLake is a relatively new company in the volatile cannabis industry and not well-suited for more conservative investors. It's also a smaller stock on the OTC market with only a 397.28 million market Capitalization and an average daily volume of 62,000 shares.

Looking For Higher-Yield Opportunities?

The current high-interest-rate environment has created an incredible opportunity for income-seeking investors to earn massive yields, but not through dividend stocks… Certain private market real estate investments are giving retail investors the opportunity to capitalize on these high-yield opportunities and Benzinga has identified some of the most attractive options for you to consider. 

For instance, Basecamp Alpine Notes offers a target APY of 9% with a term of only three months, making it a powerful short-term cash management tool with incredible flexibility. EquityMultiple has issued 61 Alpine Notes Series and has met all payment and funding obligations with no missed or late interest payments. With a low minimum investment of just $1,000, Basecamp Alpine Notes makes it easier than ever to start building a high-yield portfolio. 

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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