The Five Best Marijuana Stocks That Pay Dividends
There aren’t many marijuana stocks that pay dividends. The industry is simply too young. On top of that, many companies in the marijuana business aren’t turning a profit yet. And since dividends typically represent a distribution of corporate profits to shareholders, dividend payers are few and far between.
But that’s not to say they aren’t out there. You just need to know where to look…
The existence of pure-play pot stocks has been brief and erratic. The ups have been big. And so have the downs. While that’s not unexpected in a growth industry, whipsawing price swings have scared away a lot of the “smart money.” The uncertainty and lack of stability have produced more questions than answers for some investors.
Nonetheless, there is some certainty in the cannabis industry. For starters, cannabis has had a major economic impact. And that impact is expected only to grow. According to the Marijuana Business Factbook, in 2019, cannabis had an estimated $40 billion impact in the U.S. That impact is expected to more than triple as more states move towards legalization.
It’s safe to say that a lot of money is going to change hands in the name of marijuana. It’s going to make some people very rich. And meanwhile, a lot of fledgling marijuana companies will fail. According to the Small Business Association, 30% of new businesses fail during the first two years of opening. The failure rate more than doubles when you stretch the timeline to 10 years.
By some estimates, the failure rate is even higher in the marijuana space. So investing in relatively new marijuana companies is akin to hitting the craps table. And a 50-50 shot isn’t good enough odds for many of those playing with their nest egg.
Five Marijuana Stocks That Pay Dividends
- Altria Group (NYSE: MO)
- Scotts Miracle-Gro (NYSE: SMG)
- Innovative Industrial Properties (NYSE: IIPR)
- Compass Diversified Holdings Inc. (NYSE: CODI)
- AbbVie Inc. (NYSE: ABBV)
A quick glance at the list above and you probably already know these aren’t the pot stocks capturing the imagination of young investors. But those looking for stability need look no further than the performance of these marijuana stocks that pay dividends.
From One Vice to the Next
Altria is best known as one of the world’s largest producers of tobacco. But it’s quickly becoming one of the most influential cannabis companies, too. It owns a huge stake in a multinational marijuana company. And more recently, it’s been successfully throwing around its weight to lobby for marijuana legalization.
The maker of Marlboro cigarettes has a lot of exposure to the marijuana industry. And it’s in a position to benefit handsomely. But the real reason this marijuana dividend stock is so appealing is because it’s a dividend king. For more than 50 years, Altria has increased its annual dividend. That’s a level of stability that’s hard to look past and makes it hard to ignore as a marijuana stock that pays dividends.
A Grower and a Shower
Scotts Miracle-Gro stock has performed respectably for decades. But the company took things to a new level when it purchased Hawthorne Gardening Company. This subsidiary of Scotts has long been considered the standard for hydroponic growers. That’s notable because the majority of hydroponic growing is dedicated to marijuana. And marijuana growers love hydroponics.
Hawthorn gets bonus points for having its general manager named one of High Times’ most influential people in cannabis. But the real reason the company gets high marks is that this marijuana stock pays dividends. And that dividend yield has been steadily increasing over the years. That makes Scotts one of the best marijuana dividend stocks on the market.
The Power of Diversity
Innovative Industrial Properties and Compass Diversified Holdings aren’t exactly household names. But that doesn’t take anything away from their value.
Innovative is a real estate investment trust (REIT). For the uninitiated, REITs are trusts that operate income-producing real estate. A common denominator among REITs is that their rental income and capital gains get paid out in the form of dividends. And REITs are incentivized to do so because as long as 90% of taxable income is paid out as dividends, they don’t pay certain taxes. Innovative is a specialist among REITs because it focuses on leasing property to experienced, state-licensed operators of medical use cannabis facilities.
Compass, on the other hand, partners with management teams to acquire middle-market businesses – some of which have operated in the cannabis industry. Most recently, Compass sold its stake in Manitoba Harvest – a hemp food company – for an impressive profit. The holding company also gained a lot of Tilray (Nasdaq: TLRY) stock in the process.
While both of these outfits have a strong hold in the cannabis sector, it’s the impressive dividend yield that makes them worthwhile. Innovative boasts close to a 6% dividend yield. And Compass has a yield above 4%. Making both of these diversified investments strong marijuana stocks that pay dividends.
A Pot Stock Minus the Pot
AbbVie’s drug Marinol – which is a synthetic version of THC – was the first FDA-approved cannabis drug. It’s used as an appetite stimulant for those suffering from cancer, HIV and anorexia, among others.
Once Marinol went generic and dropped in price, AbbVie sold it to Alkem Laboratories in 2019. Today, AbbVie isn’t in the production or distribution of any cannabis treatments. But it does currently hold the most cannabis patents in the U.S. So while this is by no means a pure play on the pot industry, AbbVie’s intellectual property will make it a key player in the industry for years to come. This, paired with its status as a dividend aristocrat, makes AbbVie one of our favorite marijuana stocks that pay dividends. Well, that and its impressive 4% yield.
The Bottom Line on These Marijuana Stocks That Pay Dividends
There are plenty of cheap marijuana stocks out there. And a good case can be made to justify investing in them. But like any young company, they’re one scandal away from failure. Take the oh-so promising case of Theranos for example.
Now, Theranos is an extreme example of how a young and promising company can go sideways. But it also serves as a reminder of the fragility of a young company. Even one with a massive valuation.
But in the case of these five marijuana dividend stocks, there’s more certainty and less volatility. That’s because, although they’re exposed to the cannabis industry, they’re also not the purest plays in the industry. This gives investors the security of these companies’ diversification, while also benefitting from upswings.
About Matthew Makowski
Matthew Makowski is a senior research analyst and writer at Investment U. He has been studying and writing about the markets for 20 years. Equally comfortable identifying value stocks as he is discounts in the crypto markets, Matthew began mining Bitcoin in 2011 and has since honed his focus on the cryptocurrency markets as a whole. He is a graduate of Rutgers University and lives in Colorado with his dogs Dorito and Pretzel.