Critical Survey: Gladstone Commercial (NASDAQ:GOOD) vs. Innovative Industrial Properties (NYSE:IIPR)

Innovative Industrial Properties (NYSE:IIPR) and Gladstone Commercial (NASDAQ:GOOD) are both small-cap real estate companies, but which is the superior investment? We will contrast the two companies based on the strength of their dividends, earnings, valuation, institutional ownership, profitability, risk and analyst recommendations.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Innovative Industrial Properties and Gladstone Commercial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Innovative Industrial Properties	1	3	0	0	1.75
Gladstone Commercial	0	4	0	0	2.00

Innovative Industrial Properties currently has a consensus price target of $48.00, indicating a potential downside of 14.72%. Gladstone Commercial has a consensus price target of $12.83, indicating a potential upside of 0.34%. Given Gladstone Commercial’s stronger consensus rating and higher possible upside, analysts plainly believe Gladstone Commercial is more favorable than Innovative Industrial Properties.

Dividends

Innovative Industrial Properties pays an annual dividend of $7.60 per share and has a dividend yield of 13.5%. Gladstone Commercial pays an annual dividend of $1.20 per share and has a dividend yield of 9.4%. Innovative Industrial Properties pays out 172.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gladstone Commercial pays out 461.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Innovative Industrial Properties has increased its dividend for 4 consecutive years. Innovative Industrial Properties is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Innovative Industrial Properties and Gladstone Commercial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Innovative Industrial Properties	52.27%	7.73%	5.69%
Gladstone Commercial	14.55%	14.61%	1.99%

Earnings and Valuation

This table compares Innovative Industrial Properties and Gladstone Commercial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Innovative Industrial Properties	$265.95 million	5.83	$118.25 million	$4.41	12.76
Gladstone Commercial	$161.34 million	3.84	$19.29 million	$0.26	49.19

Innovative Industrial Properties has higher revenue and earnings than Gladstone Commercial. Innovative Industrial Properties is trading at a lower price-to-earnings ratio than Gladstone Commercial, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

70.6% of Innovative Industrial Properties shares are held by institutional investors. Comparatively, 45.5% of Gladstone Commercial shares are held by institutional investors. 2.3% of Innovative Industrial Properties shares are held by insiders. Comparatively, 1.3% of Gladstone Commercial shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Volatility & Risk

Innovative Industrial Properties has a beta of 1.35, suggesting that its stock price is 35% more volatile than the S&P 500. Comparatively, Gladstone Commercial has a beta of 1.08, suggesting that its stock price is 8% more volatile than the S&P 500.

Summary

Innovative Industrial Properties beats Gladstone Commercial on 12 of the 16 factors compared between the two stocks.

About Innovative Industrial Properties

Innovative Industrial Properties, Inc. is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialized properties leased to experienced, state-licensed operators for their regulated cannabis facilities. Innovative Industrial Properties, Inc. has elected to be taxed as a real estate investment trust, commencing with the year ended December 31, 2017.

About Gladstone Commercial

Gladstone Commercial Corporation is a real estate investment trust focused on acquiring, owning, and operating net leased industrial and office properties across the United States. Including payments through January 2024, Gladstone Commercial has paid 229 consecutive monthly cash distributions on its common stock. Prior to paying distributions on a monthly basis, Gladstone Commercial paid five consecutive quarterly cash distributions. Gladstone Commercial has never skipped or deferred a distribution since its inception in 2003.