Cannabis stocks have been one of the investing world’s top stories in 2018, and for good reason. Legalization in Canada and the potential for new markets to open around the world offers nearly limitless potential, making marijuana a top growth industry.
But most U.S.-based cannabis investors are focused on a small handful of Canadian companies that have been able to list on American exchanges. You know the names—Cronos Group CRON, Canopy Growth CGC, Tilray TLRY—and you know that these stocks have been subject to wild swings over the past several months.
These Canadian producers are the most direct route to the marijuana business, sure, but could other options be flying under the radar? Might a traditional dividend-focused investor even be able to find a stock exposed to the growth of the cannabis market?
Innovative Industrial Properties is a REIT that owns medical cannabis facilities in the U.S. It holds virtually no long-term debt and has plans to acquire facilities in new states as they legalize medical marijuana. Because of its REIT status, IIPR pays a healthy dividend, which it has already raised several times.
Analyst coverage for IIPR is limited, and recently, its outlook for near-term FFO results has slumped. This could make the stock volatile over the next few months, but IIPR remains an exciting long-term, dividend-paying option for relatively direct exposure to the marijuana market.
Scotts Miracle-Gro is the less-direct option—although the company has plans to make marijuana a larger part of its business. The fertilizer giant owns a hydroponics subsidiary called Hawthorne, which accounted for about 11% of its revenue last year. Sure, plenty of types of plants can be grown using hydroponics, but Hawthorne is likely experiencing plenty of demand from marijuana growers.
Scotts doubled down on this division this year, buying an Ohio-based hydroponics company called Sunlight Supply for $450 million. This massive investment in hydroponics is sure to give Scotts even more exposure to marijuana, making the stock an option for investors looking to get a slice of this growth potential. SMG also pays a nice dividend, yielding just over 3% right now.
Make sure to check out the attached video for more information on both companies!
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The Scotts Miracle-Gro Company (SMG): Free Stock Analysis Report
Innovative Industrial Properties, Inc. (IIPR): Free Stock Analysis Report
Cronos Group Inc. (CRON): Free Stock Analysis Report
Canopy Growth Corporation (CGC): Free Stock Analysis Report
Tilray, Inc. (TLRY): Free Stock Analysis Report
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