Updated on June 6th, 2022
This is a guest contribution from Harvi Sadhra with Hashtag Investing
With rising inflation levels and volatility in the market, people have started to look at defensive stocks. One of the best defensive options is stocks that provide passive income aka dividend stocks. Companies that pay dividend during tough times are perceived as more stable than other growth stocks.
Marijuana stocks as a whole are still in their growth stage, and are not a regular hunting ground for dividend stocks. However, there are a handful of marijuana companies in the US and Canada that do pay reasonable dividends.
Here we have mentioned 5 marijuana stocks that have a high dividend yield:
Dividend-Paying Marijuana Stock #1: Innovative Industrial Properties (IIPR)
Innovative Industrial Properties is not really a marijuana producer. This REIT (real estate investment trust) acquires properties and leases them back to cannabis companies, and earns rental income in this process. Some of its top tenants include popular marijuana players such as Trulieve Cannabis, Cresco Labs, Curaleaf Holdings, and Green Thumb Industries. Innovative is also less risky than most other pot stocks because it is generally not much affected by the challenges faced by the marijuana industry in general.
Innovative has huge growth opportunities and has been expanding itself since 2020 and currently has about 109 properties encompassing 8.1 million rentable square feet across 19 states. The REIT is still aggressively looking for more opportunities to expand itself.
Besides, Innovative has some solid financials and has also hiked its dividend payouts by 33% year-over-year to $1.70 per share in the first quarter of this year. This has been the 13th time the REIT has increased its dividend payouts since its IPO. Further, the rate of growth of its adjusted funds from operations indicates the REIT has sufficient earnings available to pay out dividends. Moreover, considering the S&P 500’s average yield of 2%, the yield of 5.3% provided by the REIT is much more attractive.
Dividend-Paying Marijuana Stock #2: Scotts Miracle Grow (SMG)
Scotts Miracle Gro is an Ohio based organization that manufactures and sells consumer lawn, garden and pest control products including hydroponics equipment and cultivation lights for the indoor growing of customers. The company has its special focus on the cannabis industry through its subsidiary Hawthorne. This stock provides a great option for investors who intend to earn passive income.
These days amidst their busy schedule not many people are flocking to start gardening. Therefore, Scotts Miracle’s earnings from continuing operations for the recent second quarter had decreased to $276.5 million or $4.94 per share and the net revenue has also fallen by 8.2% year over year to $1,678.4 million. However, on comparing its financials for the past three years it can be observed that there has been an incredible increase in its revenues and net income.
Scotts Miracle provides an annualized dividend yield of 2.73% and the size of its dividend payouts too has increased by around 20% over the past three years. Its last dividend hike was announced on April 2022. Therefore, it is indeed one of the best dividend stocks one can find in the marijuana industry at this moment.
Dividend-Paying Marijuana Stock #3: Altria Group (MO)
Altria Group is one of the top players in the tobacco sector and has made its play into the Canadian marijuana industry by acquiring a substantial stake in the top Canadian marijuana player, Cronos Group. It is trying to increase its sphere of influence by successfully lobbying for the legalization of marijuana.
Given Altria’s current position and exposure to the marijuana industry, the company stands to benefit greatly from the current developments that have been taking place in this industry these days. Besides, the company can be rightly called the dividend king as it has been increasing its dividend payouts over the past 50 years. Moreover, considering the stable balance sheet, the dividend yield that currently stands at 6.65%, and the fact that the company is likely to continue paying such handsome dividends in the coming times as well, Altria is definitely one of the best dividend stocks in the marijuana industry that the investors can hold onto.
Dividend-Paying Marijuana Stock #4: Compass Diversified Holdings (CODI)
Compass Diversified Holdings is a Connecticut-based company that boasts substantial long-term potential and has an impressive track record of growth. The company partners with the management teams to acquire businesses some of which belong to the cannabis industry. It also recently sold its stake in Manitoba Harvest, a hemp food company to Tilray, one of the biggest cannabis companies and thereby earning a large number of Tilray shares in the process.
Through all these strings of acquisitions, Compass has gained a strong hold in the emerging cannabis sector. Further, the company already has an impressive dividend yield of 4.34%. Its financial position also indicates it will be able to support its dividend payments well in the coming days as well. Therefore, if anyone wants a dividend-paying stock having diversified exposure including a strong hold on the marijuana industry, they can go for Compass.
Dividend-Paying Marijuana Stock #5: Constellation Brands (STZ)
Constellation Brands is one of the world’s largest alcoholic beverage companies that has invested $4 billion in the Canadian marijuana player Canopy Growth (CGC) and in the process has got a substantial hold over the marijuana industry. The company also intends to roll out marijuana-infused beverages due to its vast experience in the beverage industry.
The investors of this company are provided with a dividend yield of about 1.30% which is not a lot but is much better compared to other pot stocks that make no dividend payouts at all. Besides, because of its huge investment in Canopy Growth, the company gets to taste the fruits of all the developments taking place in the marijuana industry.
To conclude, depending on one’s personal preference and risk appetite, there are various ways to gain exposure to the cannabis industry. While some stocks provide direct exposure some don’t. The above-mentioned stocks apart from paying off decent dividends also provide a reasonable exposure to the cannabis industry. But before investing in any of these stocks, investors should properly research the risks associated with each of them.
Other Dividend Lists
The following lists contain many more high-quality dividend stock investment opportunities:
- The Dividend Aristocrats List is comprised of 65 stocks in the S&P 500 Index with 25+ years of consecutive dividend increases.
- The High Yield Dividend Aristocrats List is comprised of the 20 Dividend Aristocrats with the highest current yields.
- The Dividend Achievers List is comprised of ~350 stocks with 10+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of 38 stocks with 50+ years of consecutive dividend increases.
- The High Yield Dividend Kings List is comprised of the 20 Dividend Kings with the highest current yields.
- The Blue Chip Stocks List: stocks that qualify as Dividend Achievers, Dividend Aristocrats, and/or Dividend Kings
- The High Dividend Stocks List: stocks that appeal to investors interested in the highest yields of 5% or more.
- The Monthly Dividend Stocks List: stocks that pay dividends every month, for 12 dividend payments per year.
- The Dividend Champions List: stocks that have increased their dividends for 25+ consecutive years.
Note: Not all Dividend Champions are Dividend Aristocrats because Dividend Aristocrats have additional requirements like being in The S&P 500.
- The Dividend Contenders List: 10-24 consecutive years of dividend increases.
- The Dividend Challengers List: 5-9 consecutive years of dividend increases.