Global marijuana sales will soar to $200 billion within the next decade, according to investment bank Stifel. Fortunes will be made by investors who are able to identify the companies best positioned to succeed within this enormous and fast-growing market.
If you'd like to cash in on the cannabis boom, here are three high-quality businesses with particularly attractive growth prospects.
Innovative Industrial Properties
Innovative Industrial Properties (IIPR 0.82%) excels at turning cannabis into cash for its investors. Rather than produce it directly, IIP acquires facilities that can be used to grow medical marijuana and leases them to state-licensed producers. This real estate investment trust (REIT) then passes the cash flow from these leases on to its shareholders via fast-growing dividend payments.
IIP's total addressable market is set to grow even larger as more states legalize marijuana. Yet it has plenty of room to expand within its existing markets. Already more than 30 states have legalized medical marijuana. IIP currently owns 66 properties in 17 states. That's up from 11 properties in nine states at the beginning of 2019.
While expanding its property portfolio, IIP has increased its dividend from $0.15 in the second quarter of 2017 to $1.24 in the fourth quarter of 2020. Its stock price, in turn, has soared more than 880% since its initial public offering (IPO) in December 2016. And with so much growth still to come, you can expect Innovative Industrial Properties to deliver more dividend increases and share price appreciation in 2021 and beyond.
Investors often overlook Altria (MO -0.10%) as a way to profit from marijuana. That's a mistake. The tobacco titan is poised to emerge as a formidable force in this high-growth industry.
Altria purchased a 45% stake in Canadian marijuana producer Cronos Group (CRON 1.69%) for $1.8 billion in December 2018. It also owns a warrant that gives it the right to increase its stake to 55%. Doing so would give Altria majority control of the cannabis company and make it easier for it to acquire Cronos Group's remaining shares if it so chose.
Altria's regulatory and distribution expertise should help Cronos Group expand its market share in the coming years. Altria could also use some of its $8 billion in annual free cash flow to acquire other marijuana-related businesses -- and consolidate the fragmented cannabis industry in the process.
In the meantime, Altria's shareholders can earn a hefty 8% yield on their investment. The tobacco giant has increased its dividend 55 times in the last 51 years and more than doubled its cash payout over the last decade.
Better still, Altria's shares can currently be had for only 9 times analysts' earnings estimates for 2021. That's a bargain price for the best high-yield marijuana dividend stock available in the market today.
If you're looking for a pure-play marijuana stock, Planet 13 Holdings (PLNH.F 13.03%) could be just what you seek. It operates the largest cannabis dispensary and entertainment complex in the world in Nevada, one of the most attractive marijuana markets in the U.S.
The 112,000-square-foot Planet 13 SuperStore is near the Las Vegas Strip. Its broad selection of marijuana, cannabis extracts, and infused products have made it a popular destination for locals and tourists alike.
Despite the challenges posed by the COVID-19 crisis, Planet 13 generated record sales in the third quarter. It successfully adapted to coronavirus-related capacity restraints by offering curbside pickup and delivery options to customers. Its revenue, in turn, rose 36.5% year over year to $22.8 million, while its earnings before interest, taxes, depreciation, and amortization (EBITDA) soared 84%, to $6.2 million.
You can expect Planet 13's revenue and profits to head even higher in 2021. It's launching another cannabis SuperStore in California. The 40,000-square-foot site will be just 10 minutes from Disneyland and close to the South Coast Plaza Mall, which hosts 24 million visitors a year. If Planet 13 can find success with its SuperStore model in markets outside Las Vegas, shareholders could enjoy handsome gains in the year ahead.