Dividend investors often gravitate towards certain sectors that are considered the safest in the market, including well-known sectors such as industrials or consumer staples. But in terms of growth, these sectors can often struggle, meaning investors may have to forfeit growth in exchange for stability. While that certainly has appeal for a lot of investors, income investors looking for growth may need to look to alternative sectors…
One such sector is the cannabis industry. While cannabis is still in the early stages, there are some companies with exposure to cannabis that offer investors exposure to the high growth potential of cannabis, but also pay dividends to shareholders. There is even a cannabis Real Estate Investment Trust, typically a popular asset class among income investors.
Investors often have to make the choice between growth or dividends, but with cannabis-related stocks, sometimes they come from the same place. In this article, we’ll highlight three stocks that we see as favorable stocks to gain exposure to the burgeoning cannabis industry, while also receiving dividends.
The three stocks highlighted here have very different ways of benefiting from cannabis utilization, and all three offer different growth paths and levels of dividend safety and yield. Still, for investors looking for growth and dividends, cannabis has become an increasingly accepted way to achieve both.
Cannabis Stocks to Buy: Innovative Industrial Properties (IIPR)
Our first stock is an REIT that’s nearly a pure play on the industry, specializing in properties used to cultivate and sell cannabis products. IIPR is the only cannabis-related REIT that has been approved for trading on the major U.S. stock exchanges, so investor capital has flocked to the stock since it became publicly-traded.
IIPR owns 69 properties in 17 U.S. states, and those numbers are growing rapidly. The trust is widely regarded as the fastest-growing REIT in the market today, but that hasn’t stopped it from being a serious income stock very early on in its life.
The trust’s most recent earnings report showed extremely strong year-over-year growth, with adjusted funds-from-operations (FFO) of $37 million in Q4, more than double the year-ago period. The trust acquired four new properties during the quarter and expanded an existing property, totaling 848 thousand rentable square feet. The trust also collected 100% of its contracted rent during the quarter, in contrast to many REITs with pandemic-stricken customers that are struggling with sluggish demand.
We currently project 25% FFO-per-share annual growth for the next five years as IIPR continues to raise capital and expand aggressively, which is helping it to grow its FFO on a dollar basis. The trust is issuing common shares at an aggressive rate as well, which will cause FFO on a per-share basis to rise much less quickly than on a dollar basis. Still, we see close to $20 in FFO-per-share in 2026, after accounting for a rapid rise in the share count.
IIPR has raised its dividend payout very quickly since becoming publicly-traded, and we project it will pay out 85% of its FFO this year in dividends. That gives the stock a nice 3% current yield, with room for future increases as its FFO is likely to continue growing at a high rate.
The Scotts Miracle-Gro Company (SMG)
Our next stock is one that many investors may find surprising in its access to the cannabis sector, Scotts Miracle-Gro. Scotts is one of the world’s largest lawn and garden companies, selling everything from fertilizer and grass seed to outdoor cleaners, weed killers, disease control products and more.
Scotts’ products began to be used in the production of cannabis in…
Continue reading at YAHOO! FINANCE