How To Secure Dividends And Returns In Marijuana Real Estate: Analysis Reveals Stock With Potential

New Lake Capital Partners NLCP has emerged as a key player, capitalizing on the industry's expansion and the increasing need for capital among multi-state operators (MSOs).

The company focuses on real estate investments and specializes in acquiring and leasing properties to businesses that are involved in the cultivation, production, and sale of cannabis.

This includes dispensaries, grow houses, and other facilities integral to the cannabis supply chain. Senior analyst Pablo Zuanic of Zuanic & Associates provides an in-depth analysis of NLCP's financial health and prospects in his latest equity research report.

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Financial Highlights And Growth Prospects

NLCP's stock performance has shown resilience and promise, outperforming its peers significantly over the past 90 days with a 16% increase. According to Zuanic, this surge is attributed to NLCP's solid financial foundation and strategic positioning in the cannabis real estate sector.

With a total annualized revenue growth and an attractive dividend yield of 8.7%, NLCP stands out amongst competitors. Its conservative leverage, with a debt-to-equity ratio of 0.5, underscores a cautious yet effective approach to growth.

This means that NLCP is making more money each year and rewards its investors with a strong 8.7% profit on their investment, which is quite good compared to other similar companies. At the same time, they're careful with how much money they borrow; they only owe half of what their company is worth, showing they're growing their business thoughtfully and safely.

Consistent Growth

The company's net real estate book remained stable at $380 million as of September 2022, with adjusted funds from operations (AFFO) experiencing a modest 1% increase in Q4 2023.

Rental income rose by 5% to $12.7 million, reflecting a stable and growing income stream. NLCP's properties are fully rented, and the company has successfully collected 100% of contractual rents, highlighting its operational efficiency and the quality of its tenant base.

NLCP's real estate value stayed the same at $380 million up to September 2022, and the money they made from their operations slightly went up by 1% in the last quarter of 2023.

They earned 5% more from renting out properties, making $12.7 million, showing they're doing well and making more money. All of their properties are rented out, and they've managed to collect all the rent they were supposed to, proving they run things well and have reliable tenants.

Strategic Market Position

Zuanic's report emphasizes NLCP's unique position in the market, benefiting from a favorable industry backdrop.

With more states legalizing cannabis, demand for capital among MSOs is on the rise and NLCP is well-placed to meet this demand.

By owning and managing cannabis real estate, NLCP provides essential capital and infrastructure to multi-state operators (MSOs) in the sector.

The company expects significant growth, particularly in key markets like Florida, Ohio, and Pennsylvania, which constitute 47% of NLCP's portfolio.

Furthermore, the potential for federal regulatory reform and banking access improvements could further enhance NLCP's growth trajectory. The company's well-protected book, with EBITDA coverage ratios significantly above industry norms, and its conservative use of leverage present a low-risk profile with substantial upside potential.

Investment Outlook

Zuanic remains bullish on NLCP, maintaining an Overweight rating, which means the company could offer higher returns compared to other companies.

He identifies multiple drivers for future share price appreciation, including an improving macro-outlook for the cannabis industry, potential federal-level reforms, portfolio expansion, and a secure dividend yield.

This means that despite the ups and downs in the market or the economy, NLCP is expected to continue paying out its dividends without significant risk of reduction or discontinuation.

This reliability is especially appealing to investors looking for stable income from their investments, alongside the potential for share price growth driven by positive industry trends and company expansion.

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