Revealed: This Pot Stock Could Soon Pay a Dividend

One of the biggest stories in Canadian business over the latter half of 2019 was the massive implosion of Canada’s marijuana sector. Leading pot stocks fell as much as 50-75%.

A number of factors contributed to the fall, but mostly it came down to sentiment. Investors went from being incredibly bullish on the future of legal marijuana in Canada to realizing there was way too much supply in the system, all within the span of a few months. We’re now in a period of reckoning, which will undoubtedly end with some of the weaker producers going bankrupt.

Amid all this carnage could be an interesting buying opportunity. The legal pot market should continue to grow, as more kinks get ironed out of the system and as marijuana edibles become more popular. Many smokers still have their dealer on speed dial — something that should begin to change as more stores open with more consistent supply. And some of the top marijuana producers are finally starting to get serious about profitability, which is always a good thing for investors.

One pot stock is even considering a pretty major step — something that will immediately make it leap onto certain investors’ radars.

Dividend-paying marijuana?

Aphria (TSX:APHA)(NYSE:APHA) recently released its quarterly numbers, and the stock sold off some 8% on the news.

Investors were disappointed in top-line results. Revenue was expected to be $130 million, but actual numbers came up short, with the company only posting $121 million in sales. The company also cut its full-year revenue forecast, slashing sales estimates from $650 to $700 million to a range of $575 to $625 million.

It wasn’t all bad news, however. The company reported a tiny $1.9 million adjusted EBITDA profit in its most recent quarter and projected the adjusted EBITDA would be between $35 and $42 million for the year. In a world filled with marijuana companies that will still struggle for any sort of profitability in 2020, Aphria stands as a rare beacon of strength.

Aphria also has a strong balance sheet with nearly $400 million in cash. It’s well positioned to gobble up any prime assets from any struggling marijuana producers. And with serious profitability just around the corner, the company is even looking at sending money back to shareholders.

During the conference call discussing this quarter’s earnings with analysts, Aphria’s CFO told investors the company was strongly considering paying the sector’s first consistent dividend.

As part of his remarks, CFO Carl Merton told investors the company looks forward to “in the future being in the position to provide an annual return to our shareholders through dividends.”

Merton and the rest of Aphria’s management team didn’t mention a specific date, but I think the company could institute a regular dividend by the end of 2020, depending on whether it can deliver on its profitability goals.

Paying a regular dividend could give Aphria one major advantage over its peers. There are hundreds of Canadian mutual funds and exchange-traded funds that insist on only investing in stocks that pay a dividend. These funds are likely to have big interest in adding a fast-growing marijuana producer to their portfolios. They’re just waiting for such a company to become profitable enough a regular dividend is a possibility.

The bottom line

Although Aphria shares are reeling after cutting guidance, this dividend chatter is good news. It shows management is confident in the future and that the company is serious about profitability. The best returns going forward will come from pot producers who can show they can make consistent profits. Aphria isn’t quite there yet, but I like the direction it’s heading.

You might be missing out on one of the biggest opportunities in Canadian investing history…

Marijuana was legalized across Canada on October 17th, and a little-known Canadian company just unlocked what some experts think could be the key to profiting off the coming marijuana boom.

Besides making key partnerships with Facebook and Amazon, they’ve just made a game-changing deal with the Ontario government.

This is the company we think you should strongly consider having in your portfolio if you want to position yourself wisely for the coming marijuana boom.


Learn More About This TSX Stock Now

More reading

Fool contributor Nelson Smith has no position in any of the stocks mentioned.

Source: The Fool
Revealed: This Pot Stock Could Soon Pay a Dividend
The Fool

The Motley Fool
Contributor for investorsnews.ca
The Motley Fool is dedicated to helping the world invest — better. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, mutual funds, and premium investing services.

In all we do, we take a different approach.

We believe – and have proven over decades – that the individual investor can beat the market.

We believe that anyone can do it, even if they don’t have a lot of time or money to devote to investing.

We believe in a long-term outlook, helping people build wealth over time.

We believe that the person best positioned to take care of your financial future is you.

And we work tirelessly on behalf of our hundreds of thousands of members who are enjoying the opportunities that come with having enough money to do the things that matter to them.

While we are headquartered in Alexandria, Va., The Motley Fool advocates for the individual investor around the globe with offices in the UK, Australia, Canada, Singapore, and Germany.

Related posts