Published March 3rd, 2021
This is a guest contribution by Jason Craft at The Stock Dork
Over the past few decades, countries around the world have legalized marijuana for recreational and medical use. As a result, there has been a lot of hype around marijuana stocks among investors. While many of the top marijuana stocks have provided strong returns, there are very few that pay dividends.
However, this is starting to change as the marijuana industry becomes more mainstream. Many startup companies can’t afford to pay dividends, because they are still working to stabilize their business models. This was exactly the case for many of the world’s leading cannabis companies, until recently. As these companies become profitable, some are starting to pay dividends to shareholders.
We’ve rounded up 5 of the best marijuana stocks that pay dividends. Not all are marijuana producers, but all 5 are involved in the marijuana industry in some aspect. As a result, these 5 stocks can be part of a robust income investing strategy, and they also have the potential to provide solid returns in the long run.
Innovative Industrial Properties (IIPR)
Innovative Industrial Properties is a Real Estate Investment Trust, or REIT, that owns medical cannabis properties throughout the United States. Most of their properties are greenhouses or other industrial properties specifically for cannabis brands. IIPR typically buys these greenhouses directly from cannabis companies and leases them back out. The sale helps the cannabis company get off the ground, and the lease gives IIPR a steady stream of revenue for years to come.
REITs are a great option for income investors. This is because they are legally required to return a large portion of their income to shareholders as dividends. Right now, Innovative Industrial Properties has a dividend yield of 2.6%.
This stock has been delivering strong returns in recent months as well. Their share price has slowly but steadily improved since November 2020. This is likely due to strong earnings reports over the past several quarters, which have shown solid year-over-year growth.
Altria Group (MO)
Most investors know Altria Group as the owner of Philip Morris USA, the company that makes Marlboro cigarettes. However, they also have a 45 percent stake in Cronos Group, which is a Canadian cannabis company. While Cronos Group has its own listing on the NASDAQ, investing in Altria Group could be a better option for investors focused on dividends.
Cronos Group currently runs six different marijuana and CBD brands. These include Lord Jones, which caters to a luxury market, as well as Cove and Peace Naturals, which cater more to the health and wellness market.
Altria Group has consistently increased their dividend payouts for the last five decades, making it a Dividend King. Their payout currently stands at 7.69 percent. If you’re looking for consistent dividend payouts, it’s hard to go wrong with this popular sin stock.
Scotts Miracle-Gro (SMG)
While Scotts Miracle-Gro may not be a marijuana stock in the traditional sense, their products have become essential to the cannabis industry. They have a huge portfolio of garden and pest control products. Marijuana producers use these products to increase their yields. Scotts Miracle-Gro is also involved in hydroponics, an agricultural technique that many cannabis companies use to increase their yields.
Scotts Miracle-Gro stock has performed very well in the second half of 2020 and the beginning of 2021. Their share price has increased by more than 250 percent since hitting a low in March 2020. They also currently pay a dividend of 1.15 percent.
AbbVie Inc. (ABBV)
AbbVie is a biopharmaceutical company with a long history. They were founded as a spin-off of Abbott Laboratories in 2013. Abbott Laboratories is a Chicago medical company that dates back to the late 19th century.
At first glance, AbbVie appears to be a pretty traditional pharmaceutical company. However, they have one drug on the market that uses a synthetic form of THC. This drug is called Marinol, and it’s a popular anti-nausea treatment for chemotherapy patients. Many doctors also prescribe it for AIDS patients who struggle with a loss of appetite.
The success of this drug is indicative of the future of medical cannabis. While there’s still plenty of research to be done, it’s clear that marijuana can help people with chronic conditions live a much more comfortable life when used appropriately.
AbbVie is also a consistent dividend stock. AbbVie is on the Dividend Aristocrats list. Right now, their dividend yield is 4.8%. AbbVie shares have also provided solid returns over the past few months, especially after a significant jump up in price in November.
Constellation Brands (STZ)
Constellation Brands is primarily an alcohol manufacturer. They produce notable wine, beer, and liquor brands like Corona, Robert Mondavi, and Svedka. However, Constellation Brands also holds a major stake in Canopy Growth (CGC).
Canopy Growth is a Canadian cannabis company that makes both THC and CBD products. They have a large portfolio of 16 brands, which cater to different segments of the cannabis market. Some of their most popular brands include Tweed, which is an accessible recreational brand, and Spectrum Therapeutics, which is a medical brand.
Like Cronos Group, Canopy Growth has its own stock. However, investing in Constellation Brands is a better way for income investors to benefit from this stock. Right now, Constellation Brands has a dividend yield of 1.4%.
Constellation Brands stock has also been improving significantly over the past several months. They have more than fully recovered from the lows of the COVID-19 pandemic, and their stock hit a five year high point in February 2021. Constellation Brands also has a very large, diverse portfolio, which makes it a relatively stable investment option.
As the marijuana industry grows, it’s likely that more stocks in this industry will start paying dividends. Many people rely on cannabis products for medical treatment or just for relaxation. This is an industry that’s only going to get bigger over time, and there’s plenty of opportunity for income investors if you know where to look.