3 Reasons to Buy NewLake Capital Partners Stock and 1 Reason Not To

NewLake Capital Partners (OTC: NLCP) is one of the few real estate investment trusts (REITs) that serve the cannabis industry. While pot stocks have seen a lot of ups and downs over the past few years, NewLake has charted a steadier course, though it is down more than 6% so far this year.

That recent dip may actually represent a disconnect between market sentiment and operational reality. While the broader cannabis industry remains volatile due to price compression and the slow pace of change on the federal regulatory front, NewLake has insulated itself through a disciplined triple net lease model and a fortress-like balance sheet. Here are three reasons to buy NewLake Capital and one reason not to.

Image source: Getty Images.

Resilience through high-yield income and payout discipline

The most compelling argument for NewLake at its current discounted price is its generous and well-covered dividend, which yields around 11.5% at the current share price. That yield appears to be safe. In 2025, the company reported an adjusted funds from operations (AFFO) payout ratio of 85%. By contrast, the largest cannabis REIT, Innovative Industrial Properties, has an AFFO payout ratio of 105%.

Since its initial public offering (IPO) in 2021, NewLake has increased its dividend by 79%. In a high-inflation environment, a double-digit percentage yield from a company that has no debt maturities until May 2027 provides a significant margin of safety.

Financial stability in a high-risk industry

NewLake carries a debt-to-equity ratio of around 5.1%, with more cash on hand than total debt. While competitors may be forced to halt acquisitions due to high borrowing costs, NewLake can use its total liquidity of $106.3 million, including $23.9 million in cash and equivalents, to acquire high-quality assets at favorable valuations.

The quality of NewLake's tenant base also adds a layer of protection. Its properties are leased to some of the most established names in the industry, including Curaleaf (OTC: CURLF), Trulieve, and Cresco Labs. By focusing on state-licensed facilities in limited-license markets, NewLake ensures that its properties remain mission-critical to its tenants. Even if one specific operator faces headwinds, the underlying real estate -- often including sophisticated cultivation and processing equipment -- would remain highly valuable to any successor looking to enter that state market.

Long-term growth catalysts and regulatory tailwinds

The final piece of the bull case for NewLake lies in the inevitable maturation of the U.S. cannabis market. The industry's economic impact is projected to continue growing at a steady pace through the end of the decade. One report by Grand View Research forecasts a compound annual growth rate of 11.5% for the industry through 2030.

Several regulatory shifts are expected in 2026, among them, the rescheduling of cannabis from Schedule I to Schedule III. There has also been momentum in Congress for passing the SAFER Banking Act, which would open the way for state-sanctioned marijuana businesses to access the federally regulated banking system.

Both could serve as massive rerating catalysts for NewLake stock. If cannabis is moved to a lower-risk federal schedule, the tax burden on NewLake's tenants would drop significantly, instantly improving their credit profiles and, by extension, the value of NewLake's leases.

The biggest area of caution

While NewLake has quality clients, it lacks much diversity. It has 34 properties across 12 states, 31 of which are currently leased. However, Curaleaf leases just over 25% of NewLake's properties. If, for any reason, Curaleaf were to struggle to pay rent, it would be catastrophic, at least in the short term, to NewLake's stock.

Curaleaf reported $1.27 billion in revenue in 2025, down nearly 5%, and booked an adjusted new loss of $0.23 per share -- 38% wider than its $0.15 per share adjusted net loss in 2024. Curaleaf also has 5 times as much debt as it does cash.

James Halley has positions in Innovative Industrial Properties and NewLake Capital Partners. The Motley Fool recommends Cresco Labs and Innovative Industrial Properties. The Motley Fool has a disclosure policy.