When it comes to investing in marijuana stocks, many more traditional investors are seeking out shares of the companies that are paying dividends. Beyond some cannabis stocks, some mutual funds and ETFs pay dividends to their shareholders as well.
The reason you’re probably here looking for a list of them, however, is that not all cannabis-related investments pay dividends. In fact, not many at all.
What are Dividends?
Dividends, according to Vanguard, are “payments of income from companies in which you own stock.” For those who own stocks through mutual funds or exchange-traded funds, “the company will pay the dividend to the fund, and it will then be passed on to you through a fund dividend.”
While most are paid in cash, dividends can also be issued as shares of stock, or other property.
Pot Stocks Paying Dividends
Back in December of 2018, Altria announced that it was investing $2.4 billion CAD into international cannabis conglomerate Cronos Group Inc. (NASDAQ:CRON) (TSX:CRON). The deal gave Altria a massive equity stake in Cronos with additional warrants to purchase a majority stake in the company. Beyond just the legal marijuana industry, this stake in Cronos has given Altria Group exposure to Cronos portfolio companies like CBD skincare brand Lord Jones and more.
According to Dividend.com, shares of MO have an annualized dividend payout of $3.36 USD per share, and a dividend yield of 7.67% as of the time this was written.
Anyone who says Anheuser Busch isn’t a cannabis stock needs to take another look at the company’s trading symbol on the New York Stock Exchange. Beyond that, AB Inbev has partnered with major cannabis industry heavyweight Tilray Inc. (NASDAQ:TLRY) to research non-alcoholic cannabinoid-infused beverages that include THC and/or CBD. While Anheuser-Busch is running its studies through its Canadian subsidiary, Labatt Breweries that doesn’t change how major this is.
As for the income, BUD pays an annualized dividend of $1.77 per share, amounting to a current dividend yield of 2.65%
The cannabis-focused REIT, Innovative Industrial Properties, announced the company’s first dividend payment of $0.15 all the way back on May 30th of 2017., and has paid one every quarter since then. Owning a large portfolio of cannabis facilities and properties across the country from California to Massachusetts and everywhere in between, IIPR’s dividend is essentially backed by the rental income paid by the leaseholders that occupy and operate these facilities.
Real estate investment trusts, commonly referred to as REITs, are commonly associated with dividends because they are generally required to pay them to retain their tax status as a REIT.
As for dividend growth rate, the recent dividend announced in December of 2019 was $1.00 per share, representing an approximately 28% increase over IIP’s third quarter 2019 dividend of $0.78 per share of common stock, and an approximately 186% increase over IIP’s fourth quarter 2018 dividend of $0.35 per share of common stock. The dividend is equivalent to an annualized dividend of $4.00 per common share, and is the sixth dividend increase since IIP completed its initial public offering in December 2016.
While Molson Coors may be a beer beast, but it officially became a pot stock last year when it partnered up with HEXO Corp. (NYSE:HEXO) (TSX:HEXO) on a cannabis-related joint venture, no pun intended. Known as The Hydropothecary at the time, HEXO and Molson formed a joint venture to develop cannabinoid-infused beverages for Canada’s legal market.
While it isn’t as high of a yield as Altria, Molson Coors shares currently boast a 4.21% dividend yield and an annualized dividend payout of $2.28 USD per share.
Last but not least, NYSE-listed Scotts Miracle-Gro has been helping gardeners grow a different kind of grass – cannabis. Although the ancillary company doesn’t directly touch the plant, Scotts has invested heavily in the space. From the Scotts’ investments in hydroponic equipment makers and more, to their partnership with Canadian licensed cannabis producer, The Flowr Corporation (TSXV:FLWR) (OTC:FLWPF), the company has a far more diverse exposure to the marijuana sector than it may seem on the surface.
While it may not seem like much of a yield, according to Zacks Equity Research, “the lawn and garden products company is paying out a dividend of $0.58 per share at the moment, with a dividend yield of 2.04% compared to the Fertilizers industry’s yield of 1.2% and the S&P 500’s yield of 1.88%.”
Furthermore, the company has a long history of consistent dividend growth, as “Scotts Miracle-Gro has increased its dividend 5 times on a year-over-year basis over the last 5 years for an average annual increase of 5.44%.”
Two Dividend-Paying Marijuana ETFs Too
In addition to the five stocks listed above, it should be mentioned that there are a handful of ETFs such as The Cannabis ETF (NYSE:THCX) and the ETFMG Alternative Harvest ETF (NYSE:MJ), which also pay out dividends to their shareholders.
Taxation of Dividends
For those holding marijuana stocks and ETFs with dividends, it is important to understand how the payments will be taxed. On a very basic level, your taxable rate on dividends depends both on how long you’ve held the shares as well as your tax bracket.
Dividends can be deemed “qualified” for tax purposes, and dividends that aren’t are called “nonqualified.” For the most part, payments from the common shares of U.S. corporations are “qualified” so long as you’ve held the securities for more than 60 days.
In order for dividends passed through by a fund to be qualified, the fund must first meet the more-than-60-days requirement for the individual securities paying the dividends. Additionally, the owner of the fund must own the fund shares for more than 60 days.
According to Vanguard, “qualified” dividends are subject to a 0%, 15%, or 20% tax rate, depending on your level of taxable income. Dividends that are nonqualified are taxed at your usual income tax rate.
Because of this, if you buy shares of a cannabis-related company, mutual fund, or ETF immediately ahead of a dividend being paid, you may end up worse off from a tax point of view.
The legal cannabis industry is still very nascent, and newly listed public companies in rapidly growing industries need capital to expand. Therefore, many just don’t have the excess capital to pay out dividends just yet. That’s not to say these same companies won’t pay out dividends in the future once they’ve got the retained income to support one.
Just because a company doesn’t pay dividends doesn’t necessarily mean they’re a bad investment, it just means that as a shareholder you are depending on making a return through share price appreciation rather than recurring dividend income. That has worked out very well for Google investors as stock prices have soared despite the shares never paying a dividend.
Regardless, some investors just love dividend-paying stocks, and when it comes to the marijuana industry, investors are no different. And, what’s not to love if you happen to get both dividends and share price appreciation.
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Disclaimer: DMO Holdings Corp., which owns MJobserver.com, is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice, tax advice, or recommendations to readers of this release. Before making any financial or investment decisions, readers should seek their own professional advice and that of their own professional financial adviser.
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