Dividends and Oklahoma: Pot thrives in this red state

If you think about Oklahoma, besides the Broadway show by the same name, Oklahoma is a staunchly conservative state with a history of drawing people in search of wealth from the land. Oil and gas are produced, cattle are raised and two major Universities among other things produced top ranked college football team Oklahoma University and Oklahoma Sooners.

According to an article by Simon Romero of the New York Times News Service, one of the biggest growing business is in the agricultural field – producing cannabis. Greenhouses are popping up all over the state because every since the state legalized medical marijuana 3 years ago, Oklahoma is the easiest place to launch a weed business. The state now boasts more retail cannabis stores than Colorado, Oregon and Washington combined. In October, Oklahoma eclipsed California as the state with the largest number of licensed cannabis farms – more than 9,000. The average farm has about 25 employees or over 200,000 workers.

In Oklahoma just about anyone who wants a medical card, about 10% of Oklahoma’s nearly 4 million residents have a card.

The other reason why an influx of stores is the barrier to entry is $2,500 versus close to $100,000 in most states. For a very conservative state, state officials have taken a fairly hands-off approach. Because of the growth, groups representing ranchers, farmers, sheriffs and crop dusters have joined forces to call for a moratorium on new licences. They cite climbing prices for land, illicit farms, strains on rural water and electricity supplies. (those are almost blue state reasons).

Adria Berry, the director of Oklahoma Medical Marijuana Authority, which oversees the industry and reported nearly $138 million in revenue from retail, state and local taxes in 2021 from the sale of cannabis, believes the moratorium is not likely.

Why are people starting business in Oklahoma? money – growers can grow cannabis for $100 a pound, and then turn around and sell it for $3,500 to $4,000 a pound in California and New York State. The big multi companies are not in Oklahoma because too much competition and selling out of state is not 100% legal. The end result of too much competition is prices fall, some farms go bankrupt and consolidations happen till money can be made.

Linking to dividend paying stocks, in every market there are barriers to entry or moats, some of them are relatively small and some of the moats are large. As an investor, it is easier to invest in industries with large moats (ask Warren Buffett) however all business operate under the same basic principles. The lower the barrier to entry, the more people who will come into the industry but there will be more money losers, although there are great stories involved. As an dividend investor you want to read the stories, but have money coming into your brokerage account on a regular basis.

There are more questions than answers, till the next time – to raising questions.

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