For dividend investors, the cannabis sector looks pretty scary.
This high-growth sector has a reputation for extreme volatility, unpredictable earnings reports, and mega-acquisitions that can stress the balance sheet.
While these traits hold true for a large segment of the cannabis sector, what many investors don’t realize is that there is a hidden class of cannabis stocks that completely buck the trend.
These undercover cannabis stocks offer more share price and earnings stability than the traditional cannabis stock. More important – they are also excellent dividend payers.
3 of the Best Cannabis Dividend Stocks
These three dividend payers all have unique qualities:
- The first pays a 5.4% dividend that is a 150% premium to the S&P 500’s 1.8% dividend yield.
- The second has grown its dividend by more than 200% in the last two years.
- The third has a low dividend payout ratio of 58%, making it highly reliable.
Abbvie (ABBV) – 5.4% Yield
Abbvie is one of the largest pharmaceutical companies in the world and owner of the world’s #1 selling drug Humira. Today, Abbvie is turning its attention to the cannabis industry. Abbvie owns Marinol, a rare FDA-approved cannabis drug created using synthetic THC and designed to treat appetite loss and nausea in cancer and AIDS patients. Marinol only represents a small percent of Abbvie’s annual drug revenue – however, it shows that Abbvie is interested in gaining exposure to the high-growth cannabis pharmaceutical industry and moving forward I expect Abbvie to move further into cannabis drugs.
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Abbvie offers the largest dividend payment of any company operating in the cannabis sector with a current yield of 5.4%, more than a 150% premium to the S&P 500’s 1.8 % yield. Abbvie is also one of the most reliable dividend payers in the history of the S&P 500. As a member of the extremely exclusive “Dividend Aristocrats” – Abbvie is just one of 57 companies that have raised its dividend for at least 25 consecutive years. Take a look at the 5-year price chart below.
Fastest Growing Dividend
Innovative Industrial Properties (IIPR) – 2.3% Yield
Innovative Industrial Properties is headquartered in San Diego, California and is one of the largest cannabis companies in the United States with a market cap of $835 million. I like to call IIPR the “cannabis landlord” because of its unique business model. IIPR buys cannabis cultivation facilities and then rents them out to the largest cannabis companies in the country for extra cultivation capacity. IIPR owns 14 cultivation facilities in high-growth cannabis states such as California and Massachusetts and currently boasts a 100% lease rate.
IIPR is structured as a REIT – a Real Estate Investment Trust. This corporate structure requires that IIPR pay out 90% of its net income to shareholders as dividend payments. This is the driving force behind IIPR’s fast-growing dividend payments. This quarterly dividend payer offers a current yield of 2.2%, a 20% premium to the S&P 500’s 1.8% yield. Even better, IIPR has a proven history of big dividend hikes. In September of 2017, IIPR raised its quarterly dividend 66% from $0.15 to $0.25. In September of 2018, it raised from $0.25 to $0.35. And finally in March of 2019 IIPR raised its dividend from $0.35 to $0.45. If you’re looking for a fast-growing cannabis dividend, IIPR has no peers.
Scotts Miracle-Gro (SMG) – 2.8% Yield
Scotts is a long-time industry leader in selling home gardening supplies and tools with a market cap of $4.7 billion. Much like Abbvie, Scotts has been lured by the high-growth cannabis industry. In 2014, Scotts created Hawthorn Gardening Company to supply hydroponic materials and equipment used to grow cannabis. In 2018, Scotts raised its interest in cannabis, investing $450 million to acquire Sunlight Supply, the largest hydroponic supplier in the US. By rolling the Hawthorn operations into Sunlight, the combined company was projected to generate more than $600 million in annual sales while servicing more than 1,800 hydroponic retailers in North America.
This new industry leadership in cannabis will help support Scott’s longstanding and highly reliable dividend payment. This quarterly dividend payer offers a 2.8% yield, trumping the S&P 500’s 1.8% yield by 55%. I also consider this to be the safest dividend from the group. During the Great Recession of 2009 and the years after, Scotts didn’t halt or even cut its dividend payment – continuing to reliably pay its quarterly dividend to loyal shareholders. Scots dividend payout ratio of 58% is safely below the 70% level that is considered risky. Scotts also has a history of making special dividend payments. Back in August of 2014, Scotts rewarded shareholders with a special dividend of $2.00 per share, giving its dividend yield a huge boost on the year. Take a look at the 5-year price chart below.
The Big Picture on Cannabis Stocks that Pay a Dividend
As you can see, the high-growth cannabis sector offers some great opportunities for dividend investors. Each one of these three stocks offers something unique – a high yield, high growth, and stability. So if you’re an income investor interested in getting into the cannabis game, there are some very good options that don’t require taking an excessive amount of risk while offering dividends that are on par or better than some of the best dividend stocks in the S&P 500.
The information contained in this post is for informational and educational purposes only. The trading ideas and stock selections represented on the Cannabis Stock Trades website are not tailored to your individual investment needs. Readers and members are advised to consult with their financial advisor before entering into any trade. Cannabis stocks carry a certain level of risk and we accept no responsibility for any potential losses. All trades, patterns, charts, systems, etc. discussed are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author and do not necessarily reflect those of the publisher.