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Many investors still misunderstand how REITs really work. Some of the biggest REIT fears are far more nuanced than they seem. Today's setup may be creating overlooked opportunities.

The cannabis sector continues evolving in 2026, and REITs are gaining attention again. These companies offer exposure without directly selling cannabis. Instead, they generate income through leasing and financing properties. As a result, they often provide strong dividend yields for investors. Meanwhile, industry growth remains a key long-term catalyst.

NewLake Capital Partners offers high-yield REIT exposure to the cannabis sector, currently yielding over 12% with a healthy 84% payout ratio. NLCP trades at a significant discount (~0.75x book, 7x AFFO) due to OTCQX listing and regulatory overhang, providing a margin of safety. Regulatory reclassification of cannabis could double NLCP's valuation (to 15x AFFO), enable NYSE listing, and compress yields to ~8%.

NewLake Capital Partners, Inc. (NLCP) offers defensiveness and a 12% dividend yield, outperforming MSOS over the past three years. MSOS, an ETF heavily concentrated in top cannabis stocks, remains exposed to industry-wide oversupply, margin pressure, and bankruptcy risk. NLCP's low debt, resilient rent collections, and ability to replace tenants provide downside protection absent in MSOS.

NLCP has significantly underperformed since my initial bullish stance, with the stock price down over 26%. Despite collecting dividends, NLCP's total return remains negative at 9%, failing to offset capital losses. I maintained a bullish outlook and invested several times, but kept NLCP as a small portfolio position.