We already know that marijuana legalization means more than 170% upside for the best marijuana stocks. But there are pot stocks out there that pay a hefty dividend as well.
With these dividend stocks, you can collect income while you wait for the price to break out. The top marijuana dividend stocks to buy right now are a killer combo of growth and income for any investor.
For example, our best marijuana dividend stock today pays more than twice the average S&P 500 yield...
You see, cannabis stocks have benefited from the surge in legalization in states across the U.S. in the last year. And they're going to soar even further in the year to come.
Another 10 states could legalize marijuana in 2020, unless the federal government decides to do it for all 50 at some point this year.
With that said, a number of cannabis stocks are already trading as if marijuana were legalized all across the country.
It can be difficult to know which cannabis stocks to own in today's environment. That's why we recommend that investors look at companies that are paying investors to own the stock.
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Dividend-paying cannabis companies have the necessary cash flow to increase their operations and return money to investors in the form of yield. So today, we're looking at the three best dividend stocks with cannabis exposure.
These cannabis stocks promise decent upside as well as an opportunity to collect cash in the process. Here's our first-in fact, it's expecting a dividend hike in a few months...
Cannabis Dividend Stock No. 3: Scotts Miracle-Gro
Scotts Miracle-Gro Co. (NYSE: SMG) is an agribusiness company best known for its fertilizer, garden, and pest control products. But the company has made a big splash in the cannabis industry.
Though it doesn't actually grow marijuana, it has made a series of investments to help cultivate the broader industry. Its subsidiary Hawthorne Gardening purchased General Hydroponics in 2015. In addition, it owns a large stake in AeroGrow International Inc. (OTC: AERO), a company specializing in hydroponics.
Honestly, SMG stock might be a little overvalued at the moment. Shares are trading at a little more than $111 per share. Given that shares have rallied more than 60% from their 52-week low, it might be best to wait for a bit of a pullback. Shares might dip to about $100 per share in the coming months, which would set up nicely for dividend investors.
Currently, SMG stock pays a dividend yield of 2.08%. It is possible that the firm will hike its dividend in the coming months. That said, you will want to see shares a bit lower.
Our next cannabis dividend stock has a dividend yield of 6% - about three times the S&P 500 average...
Cannabis Dividend Stock No. 2: Compass Diversified Holdings
Compass Diversified Holdings Inc. (NYSE: CODI) owns a slew of companies like Arnold Magnetic Technologies, Velocity Outdoor, and other brands.
From 2015 to early 2019, it bought out and owned specialty hemp food producer Manitoba Harvest. In February of last year, it sold the company to Tilray Inc. (NASDAQ: TLRY).
At the moment, Compass doesn't have any direct exposure to the cannabis sector after this divestiture. But given that it has experience managing firms in the hemp space, a possible acquisition in the future is increasingly likely. Currently, Trulieve Cannabis Corp. (OTC: TCNNF) is trading at an extremely attractive EV-EBIDTA multiple and would be an ideal takeover target for a private equity company.
CODI is a cash-rich company with a dividend of 6.16% and significant upside on the horizon. CODI stock could reach $28 per share by the end of 2020. That figure represents potential upside of 19.8% from Friday's closing price.
But it's still not even half the potential upside from this next stock.
Here’s our best marijuana dividend stock right now…
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Cannabis Dividend Stock No. 1: Innovative Industrial Properties
If you read Money Morning often, you know that we love real estate investment trusts (REITs), particularly in this low-interest rate environment. REITs tap into the booming real estate market and provide high dividends since they don't have to pay corporate income tax.
Innovative Industrial Properties Inc. (NYSE: IIPR) is a pure play REIT that focuses on real estate for the cannabis industry. The Park City, Utah-based company has seen its stock price pull back since last summer as the frenzy of cannabis stock buying cooled. However, the ongoing push for legalization in more than a dozen new states could be a boon for the REIT. In addition, the federal government is exploring legislation that would remove marijuana from the Schedule I list and possibly legalize cannabis.
IIPR has stable cash flow and has increased its dividend for four consecutive quarters. Some analysts project that this could easily be the fastest-growing REIT of 2020. IIPR has a dividend of 4.8%. While that yield is lower than CODI, the REIT's underlying price has significantly more upside. IIPR could easily return to $130 per share this year as low interest rates and widespread adoption of cannabis combine to make real estate in the space a more attractive proposition. That price target represents potential upside of 57.5%.
Cannabis's Hidden (but 100% Legal) Income Stream
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About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.