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There were no complaints with the latest Quarterly results from Scotts Miracle-Gro (NYSE: SMG). In its results of fiscal 2020 Q2, announced earlier this week, the company easily toped Wall Street revenue and earnings estimates.
Scotts’ main growth driver is its Hawthorne business, which is a top supplier to the cannabis industry of gardening produce. Sales of Hawthorne rose 60 per cent year-over-year to $230 million in Q2. Business is booming for Hawthorne as big states expand their legal cannabis markets.
The core consumer lawn and gardening business for Scotts continues to be a winner too. The segment ‘s sales jumped 11 per cent in Q2 due in part to new organic gardening products. With Americans staying at home because of the COVID-19 pandemic, a lot of them took up gardening. Scotts reported consumer purchases during the last week of April set a record in the company’s history for any seven-day period.
*Innovative Industrial Properties
Innovative Industrial Properties (NYSE: IIPR) ranks as the leading investment trust in real estate (REIT), specialising in the medical cannabis market. The enterprise owns 55 properties of medical cannabis in 15 states.
IIP shares have recently fallen after the company’s first quarter missed Wall Street estimates. I think this is a great opportunity to buy the stock on the dip though. While IIP fell slightly short of the revenue and earnings estimates of analysts, it still more than tripled its revenue year over year, with earnings per share rising by 118%.
More importantly, there are still very strong growth prospects for the company. IIP has already acquired a further nine properties this year. Even if this pace slows, revenue and earnings continue to rise substantially. IIP has been working with three tenants to temporarily defer rent as they address the impact of the COVID-19 pandemic. There is no reason to expect any long-term repercussions on the growth trajectory of IIP at this point, though.
One really appealing plus to IIP is its dividend. The dividend yield currently stands at 5 per cent north of the company. IIP has more than doubled its dividend payout over the last year.
* Green Thumb Industries
Talking about tremendous growth prospects for the cannabis industry, Green Thumb Industries (OTC: GTBIF) is one company that is set to profit from that growth. It is one of the largest multistatal cannabis operators in the United States.
In the fourth quarter of 2019, GTI’s revenue rose 265 per cent year-over-year. This growth was partly driven by the company’s opening of new stores in Florida, New Jersey, Ohio and Pennsylvania. Next week, GTI is set to report its Q1 results. Will its growth diminish due to COVID-19 outbreak? Don’t bet thereon.
Even with lockdowns in place, the legal cannabis market in GTI ‘s home state of Illinois continued to grow in April. In March Ohio posted record monthly sales of cannabis. A rising tide lifts all boats, and GTI is one of the largest cannabis-water boats in both states.
Probably the biggest knock against GTI is that they are not yet profitable. But that’s a problem that could be remedied in the not-too-distant future as the company’s revenue rises and the ramp-up in expenditure related to expansion efforts level off. GTI is arguably the most risky of these three stocks of marijuana, but I believe its prospects for growth make the risk worth taking for aggressive investors.