Baseball players and fans know all about the sacrifice play. It's when a batter hits the ball (either bunting or to the outfield) that gets an out for the opposing team but advances one or more base runners.
Sometimes, investors might think a sacrifice play of sorts is needed when buying dividend stocks. Growth is ruled out in order to advance the goal of receiving steady income.
While some dividend stocks might require the trade-off between growth and income, it's not a sacrifice that you necessarily have to make. Here's a dividend stock that Wall Street predicts will soar more than 40%.
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Lawns, gardens, and weed
The consensus 12-month price target for Scotts Miracle-Gro (SMG +0.45%) is $267. That's nearly 42% above the current share price.
If you have a lawn or garden, you're probably quite familiar with Scotts. The company has been in business since 1868 when Orlando McLean Scott opened a store in Marysville, Ohio. Scott started off selling hardware but soon expanded into selling seed to farmers. By the early 1900s, he was selling seed to consumers who weren't farmers as well.
Fast forward to today. Scotts' products are carried in major retail stores across the U.S. Turf Builder and WeedEx help keep lawns looking good. Miracle-Gro plant food and potting mix help home gardens grow. The company also markets branded work gloves, landscape fabric, blowers, mulchers, lawnmowers, and other tools and accessories.
But Scotts Miracle-Gro isn't just focused on keeping weeds out of lawns and gardens anymore. It operates a thriving business focused on helping weed grow. I'm referring to the company's Hawthorne unit, which ranks as the leading supplier to the cannabis industry. Hawthorne markets a wide range of hydroponics products, including lighting systems, ventilation, nutrients, water treatment, and more.
Behind Wall Street's optimism
Why do Wall Street analysts think that Scotts Miracle-Gro has so much room to run? There are several reasons.
For one thing, the stock has fallen more than 20% from its peak set earlier this year. The primary likely factor behind this pullback is that Scott's year-over-year comparisons are expected to weaken in the second half of this year. However, that's to be expected considering the huge tailwinds that the COVID-19 lockdowns provided to sales of lawn and garden products last year.
Some analysts also think that Scotts' consumer lawn and garden business should enjoy solid growth. For example, Raymond James analysts rate the stock as a strong buy in part because they believe that "dry, seasonable weather during the late spring and early fall create a highly conducive environment for lawn and garden activity."
Probably the biggest reason behind Wall Street's bullish view, though, is the seemingly unstoppable momentum for Scotts' Hawthorne unit. Marijuana legalization efforts have been enormously successful with 36 states legalizing medical cannabis and 18 states legalizing recreational marijuana. Each of these markets presents potential growth opportunities for Hawthorne.
About that dividend
Scotts Miracle-Gro initiated a dividend program in 2005. Since then, the company has paid a dividend every quarter. It has also distributed a few special dividends to shareholders through the years, most recently in 2020.
To be sure, Scotts' dividend probably won't be the first thing that attracts investors. Its yield currently stands at a relatively low 1.3%. However, the company has increased its payout every year over the last decade.
More importantly, though, Scotts offers the kind of growth prospects that most dividend stocks can't touch. For investors who want some income along with an opportunity to profit from strong growth in the cannabis market, this Wall Street darling could be just the ticket.
