The legal cannabis industry is blasting. In the United States, the use of cannabis for medicinal purposes is now legal in over 30 states. The recreational method is also frequently being adopted, in the U.S. and other countries. Canada authorized recreational cannabis last year, and after the 2018 mid-term elections, a total of 10 U.S. states have legalized recreational marijuana.
While the expanding legalization of cannabis might seem like a gold mine, investors should address marijuana stocks with attention. There are more than 100+ publicly-traded cannabis stocks, several of which are likely to deliver poor yields because of unproven business standards. As a result, investors are watching for vulnerability to cannabis with the continued confidence of dividends should think Altria Group (MO) to be the top cannabis stock.
Modern Gold Rush
For investors, the potential of the licensed cannabis industry is too tantalizing to disregard. Estimations vary, though most hints are that cannabis is operating to be a huge business. For example, on September 18th the Chief Executive Officer of Canadian cannabis producer Tilray (TLRY) said in an interview with CNBC’s Jim Cramer that cannabis could soon be a $150 billion industry. With numbers like that, it is easy to see why so many corporations would want to enter the industry.
While the circumstances for the cannabis businesses in the United States is more challenging than in Canada, because cannabis remains illegal at the federal level, Altria’s recent moves show it to sees the potential. On December 7th the company stated a $1.8 billion investment in Canadian cannabis producer Cronos Group. Per the contract, Altria will acquire a 45% equity stake in Cronos, as well as the right to choose four directors to serve on Cronos Group’s Board of Directors.
Also, the transaction includes a certificate to acquire an additional 10% ownership stake in Cronos Group at a cost of C$19.00 per share, exercisable covering four years from the closing period. Altria will help Cronos expedite its examination and expansion capabilities. While Cronos Group currently has no U.S. operations, this is poised to change quickly if and when cannabis becomes legalized at the federal level.
Two Come Together
In many ways, tobacco giant Altria—which sells the Marlboro label in the United States—is an excellent fit for an important force to enter into the cannabis industry. Altria’s production and distribution capacities are ideally established to process cannabis products, in the same way, it processes tobacco commodities. Moreover, with Altria’s massive size and liked retail shelf space, it is understandable that the corporation could quickly balance its cannabis products.
One day, maybe in the not-too-distant future, customers might see packages of Marlboro Greens next to Marlboro Reds. In the meantime, Altria allows investors a secure 6.6% dividend yield, and regular dividend increases each year. This makes Altria stock a high-yield dividend stock for investors looking for exposure to the high-growth cannabis industry.
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