It can be hard to find great marijuana dividend stocks.
Medical marijuana was first legalized less than 20 years ago in California, so most cannabis companies haven’t been established long enough to make a profit, let alone pay a portion of their profits to shareholders in the form of dividends.
However, investors looking for marijuana stocks with dividends have another option…
Pick-and-shovel plays allow you to benefit from an industry’s success without taking on the risk that comes with startups.
It’s like investing in Levi Strauss & Co. during the California Gold Rush of the 1840s and 50s. Levi’s didn’t mine gold, but it supplied the garments for the thousands of men who did.
The company’s slogan back then was even “For Men Who Toil.”
Since then, Levi Strass & Co. has become the largest pants manufacturer in the world.
Marijuana pick-and-shovel plays allow investors to profit from the legal pot industry without the risk of owning stock in a company whose product is still illegal under federal law. And because these stocks pay dividends, investors can reinvest their cash rewards to maximize their future returns.
Here are three of our favorite marijuana dividend stock plays now, plus one that is set to soar in the coming weeks…
Marijuana Dividend Stock No. 3: Scotts Miracle-Gro Co.
Scotts Miracle-Gro Co. (NYSE: SMG) is well-known for being a world leader in lawn and gardening care.
Now, the nearly 150-year-old company is making its move in the marijuana space – and it’s already started to pay off.
Nearly two years ago, Scotts’ CEO, Jim Hagedorn, purchased two companies that specialize in soil and fertilizer for cannabis growers. Then, one year later, he invested a 75% stake in Gavita International, a hydroponics equipment company.
Hydroponics is the method of growing plants without soil by using mineral nutrient solutions in a water solvent – a popular and highly effective way of growing cannabis, especially in densely populated areas.
As of December 2016, Scotts’ hydroponics business generated roughly $250 million annually, according to Bloomberg. And that number is only going to grow as we head into the new year.
As more states legalize medical and recreational marijuana, the value of legal marijuana is expected to skyrocket.
And so will the hydroponic plant market…
“The global crop value of hydroponically grown plants is expected to climb from $17 billion in 2013 to $24 billion by 2018,” said Money Morning Director of Technology and Venture Capital Research Michael Robinson. “That’s a 41% increase in just five years.”
According to Michael, Scotts’ commanding presence in the hydroponics space makes it a buy no matter what marijuana does, thanks to the growing demand for hydroponic equipment among young urban consumers. On top of that, SMG pays a 2.16% dividend yield and has been growing its dividend consistently for the past seven years.
And at $98.04, SMG is down 4% from Tuesday’s all-time high, making for a nice buying opportunity. We wouldn’t wait much longer, though. The vehemently pro-weed Phil Murphy was just elected governor of New Jersey, the most densely populated state in the United States. That means hydroponics – and Scotts – are set to soar.
Michael is our pot stock expert here at Money Morning – and for good reason. He’s been following the burgeoning marijuana industry closely, and he’s already brought readers 10 double-digit winners and eight triple-digits winners over the past year.
In order to find those mega-winners, he had to screen hundreds of companies using extensive, rigorous criteria and analysis.
And this next company is near the top of his list…
Marijuana Dividend Stock No. 2: Constellation Brands Inc.
Constellation Brands Inc. (NYSE: STZ), which owns popular beer brands like Corona, is the latest company to realize the profit potential of the legal marijuana industry.
Just last month, the beer distributor bought a 9.9% stake is the largest publicly traded legal marijuana company: Canopy Growth Corp. (TSE: WEED).
The $191 million deal gives Constellation some traction in an industry expected to soon take off.
“We’re obviously trying to get first-mover advantage,” said Constellation’s CEO Rob Sands to The Wall Street Journal on Oct. 29. “We think that [nationwide marijuana legalization] is highly likely, given what’s happened at the state level.”
But Constellation doesn’t just want to profit from the industry’s imminent success – it wants to be a part of it.
Constellation is planning to use its new 9.9% stake in Canopy to develop, market, and sell cannabis-infused beverages.
The company is interested in developing drinkable cannabis products that don’t contain alcohol. The products would be alongside others currently on the market in U.S. states where they are legal, like cannabis-infused sodas, coffees, and fruit elixirs.
STZ recently paid out a quarterly dividend of $0.52 per share. At the current stock price of $218.23, its dividend yield is .95%. But it’s on the way up.
Historically, STZ’s dividend has increased over 25% each May. And now that STZ is in the budding marijuana industry, we expect its dividend – and its stock price – to keep growing for years to come.
We recommend getting in on this company now, before California’s recreational marijuana legalization goes into full effect on Jan. 1 and this stock becomes widely recognized as a must-have.
This next marijuana dividend stock is one of Michael’s all-time favorites.
You’ll likely see double- and even triple-digit gains from this stock, and it pays a dividend that puts you way out ahead of inflation and low interest rates, too.
What’s more, all kinds of small legal cannabis companies are beating a path to its door for help with a very tricky problem…
Marijuana Dividend Stock No. 1: Microsoft Corp.
When you think “Microsoft Corp.“ (Nasdaq: MSFT), cannabis probably isn’t the first thing that comes to mind. Yet, this company is a serious player in the legal cannabis space.
The Redmond, Wash.-based tech juggernaut won’t be marketing stony edibles or any potent new strains of weed.
In fact, it won’t touch so much as a seed. It’s all about the partnerships.
This blue-chip tech favorite is involved with the software side of the cannabis sector, partnering with a California-based startup called Kind Financial to help ensure cannabis companies stay inside the legal lines.
“Microsoft is working with Kind’s ‘Government Solutions’ division to make available to state and local governments the software they need to develop ways to track compliance,” Michael told his readers on Oct. 18. “Strict compliance is a way to make legal weed safe for consumers in a regulated marketplace and palatable to ‘law-and-order’ types in governments and legislatures.”
The software it’s created will allow governments and entrepreneurs to monitor the distribution of cannabis “from seed to sale” and ensure compliance along the way.
But this move from Microsoft is about much more than keeping cannabis companies on the straight and narrow.
“In one swoop, Microsoft has done nothing less than legitimize the cannabis trade in the eyes of many,” said Michael.
“The company will begin by marketing the software to government employees, but hasn’t ruled out marketing through dedicated cannabis events,” Michael added. “The Microsoft logo flying proudly at a conference packed with marijuana growers and distributors would be a huge leap forward for the industry.”
Microsoft gets you low-risk entry into the legal cannabis sector and a respectable 2.00% dividend yield.
“This is one to buy now and build out on dips,” recommends Michael.
It’s a little expensive right now thanks to an earnings boost, but keep your eye on it: You don’t want to miss a single buying opportunity with this tech and marijuana mainstay.
— Casey Wilson
Source: Money Morning