Dear DTA,
Hi. I’m 65 years old and retired. I have an income of $3,700 per month. I want to invest $500/month into the marijuana industry. Possibly more. I want to make good investments. Please advise.
-David P.
Hi, David.
Thanks for your readership. And thanks for writing in.
You’re in a great spot, David. That’s a very healthy retirement income that I think a lot of your fellow retirees would find enviable.
I’m going to assume the other $3,100 is more than enough for you to live off of.
Now, everyone invests a little bit differently.
That’s because we all have different risk tolerances, circles of competence, time horizons, etc.
No two situations are exactly the same.
But I’ll give you a little background on me so that you understand where I’m coming from.
I’m a fellow retiree, David.
Except I retired decades before most people.
I quit my job and retired in my early 30s, as I share in my Early Retirement Blueprint – a step-by-step guide that can help almost anyone retire early.
A major aspect of my financial situation is, of course, my investing activities.
Well, the investment strategy I’ve used to secure my early retirement and live out my dreams is dividend growth investing.
So this is my frame of reference.
I invest only in high-quality, world-class businesses.
These companies are prolific at growing their profit. So prolific, in fact, they end up with more cash flow than they know what to do with. Thus, they end up sending a large chunk of that profit back to their shareholders, in the form of growing cash dividend payments.
You can see what I mean by checking out the Dividend Champions, Contenders, and Challengers list.
That list has compiled data on more than 800 US-listed stocks that have paid rising dividends for at least the last five consecutive years.
When I think about successful investing over the long run, my mind naturally gravitates toward well-run, quality companies that produce a lot of growing profit and share that growing profit directly with their shareholders. They have strong fundamentals, durable competitive advantages, and limited risks. And buying these stocks when the valuations are appealing will likely treat you quite well.
I know it’s treated me very well.
I built up the bulk of my FIRE Fund in about six years as I marched toward financial independence.
That portfolio is chock-full of high-quality dividend growth stocks.
Most importantly, it generates the five-figure and growing passive dividend income I need to cover my essential expenses and be a fellow retiree, David.
The income you’re earning in retirement is very healthy.
But why not increase it? And why not do it in a way that’s fairly passive?
I understand you want to get into the marijuana industry.
The problem is that it’s a nascent industry filled with speculative businesses. Profit is scant, or even non-existent. There are certainly no dividends to be had, because there’s no profit to support them.
It’s antithetical to everything I’m talking about here. It’s the opposite of what I view intelligent long-term investing to be.
But don’t just take my word for it.
Take a look at the common stock portfolio that Warren Buffett oversees for Berkshire Hathaway Inc. (BRK.B).
Buffett is arguably the greatest investor who’s ever walked this planet.
Well, his portfolio is filled with the very stocks I’m talking about and personally investing in.
However, I’m going to share a way in which you can accomplish investing in a high-quality business that pays growing dividends – and also get into the marijuana industry at the same time!
That “back-door” method is buying stock in Altria Group Inc. (MO).
Get ready to have your mind blown.
Altria, of course, is one of the world’s largest producers and marketers of cigarettes and tobacco products.
Their venerable Marlboro brand is the most popular cigarette brand in the US, which has, in part, allowed Altria to rake in the profit year in and year out.
And we already know what growing profit leads to…
Altria has paid a growing dividend for 49 consecutive years.
That’s a very long period of time. It stretches through multiple recessions, wars, political upheaval, and stock market crashes.
Yet those dividends kept on flowing and growing.
The stock offers a 5.91% yield right now, which is immediate income back on your investment.
Plus, as I recently wrote about, the stock actually looks attractively valued right now.
Best of all for your situation?
Altria recently invested $1.8 billion for a 45% stake in Cronos Group Inc. (CRON). Altria also has warrants that allow it to later increase its ownership in Cronos up to 55% (a majority).
Cronos Group is a Canadian cannabis company that distributes globally.
This means you could buy a high-yielding, high-quality dividend growth stock and get your exposure to the marijuana industry.
In fact, at $500/month, you could almost buy 10 shares of Altria per month. That means you could build up a nice position in this behemoth in short order.
Now, you could just go right to Cronos and buy CRON shares.
But you wouldn’t be getting that fat dividend. That’s for sure.
And you wouldn’t be getting any profit, either. Nor would you be getting the diversification that Altria offers.
The marijuana exposure is just one aspect of Altria.
The company also offers the massive tobacco (obviously) business.
In addition, you get exposure to alcohol via Altria’s ~10% stake in Anheuser Busch Inbev NV (BUD).
It’s now a “triple-threat” sin stock.
Dividend growth investing helped me go from below broke to financially independent in a very short period of time.
And I believe it can help you accomplish your goals, too, David.
To that end, make sure to read through fellow contributor Dave Van Knapp’s Dividend Growth Investing Lessons.
This series is designed to educate novice and experienced investors alike on the strategy.
You can accomplish your goals and still go about it in a low-risk, income-oriented manner.
But the key is to start today.
I wish you luck and success.
Jason Fieber
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