Gardening Stock is Sprouting Dividend Growth for Investors

Scotts Miracle-Gro (NYSE: SMG) is the biggest name in U.S. lawn and garden, churning out premium products to keep yards blooming (and the spring-to-summer transition is the perfect time to start growing your portfolio’s dividend yield!). 

A sunny three-year outlook with fiscal 2025 earnings beating consensus and an 11% stock pop signals breakout momentum, making the current price a strong long-term entry point despite the rally. In a nutshell, Scotts’ brand power and cost cuts position it to dominate the $8 billion gardening market while delivering steady dividends.

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Operational Overview and Recent Earnings

Lawn and garden products feed consumer demand for outdoor spaces, sold through retailers like Home Depot (NYSE: HD) and Lowe’s (NYSE: LOW). Scotts’ U.S. consumer segment, 85% of sales, drives revenue, with the Hawthorne cannabis equipment unit adding 8%. 

In fiscal 2025’s Q2 (ended March 31), sales dipped 2% year-over-year to $1.5 billion, hit by a chilly spring, but adjusted EBITDA held steady at $200 million. Adjusted gross margins climbed to 30%, up from 28%, as cost cuts kicked in. 

Free cash flow turned positive at $100 million, up from a $50 million deficit, thanks to inventory reductions. Management’s upbeat 2025 guidance, with adjusted EPS above consensus, sparked an 11% stock surge.

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Domestic Cannabis Landscape

Of course, we’d be remiss to ignore the macro tailwind that originally put Scotts on most retail traders’ radar: cannabis legalization. 

Domestic legalization remains a patchwork, with 24 states and Washington, D.C., legalizing recreational use and 39 states allowing medical use as of May 2025, though federal law still classifies marijuana as a Schedule I substance. 

For Scotts Miracle-Gro, the upside lies in its Hawthorne segment (8% of 2024 revenue), which supplies cannabis-growing equipment. Despite a 46% drop in Q4 2024 sales to $202.6 million, attributed to oversupply in states like California, management’s pivot to consumables and potential divestiture signal a leaner, more profitable future. 

A 5-10% revenue boost by 2030 is possible if legalization expands, but regulatory risks and Hawthorne’s volatility cap near-term gains.

In other words: don’t bet the bank on Scotts as a pure-play cannabis pick, but instead buy into the wider picture and take long-term cannabis upside potential as a nice fringe benefit.

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Dividend Profile

A quarterly dividend of $0.66 per share, or $2.64 annually, yields 4.1% following the recent rally, with a 50% payout ratio backed by $400 million in annual free cash flow. 

A 20-year streak of mid-single-digit hikes, averaging 5% yearly, boosts Scotts’ reliability when it comes to returning shareholder value. Q2’s $100 million free cash flow and 30% margin underpin dividend safety, with cost reductions and volume growth fueling 5-7% raises, making Scotts a solid income pick.

Bear Case

• Tariffs could spark a slowdown, cutting consumer spending.

• Cheaper private-label products might steal of market share. 

• A federal cannabis crackdown could gut Hawthorne’s sales, down 80% from 2021 peaks. 

• Wet springs or cold snaps risk cyclical sales dips. 

• Regulatory bans on Roundup’s chemicals could force hefty R&D spend in reformulations. 

• High debt, at 4.4 times EBITDA, could force a dividend trim if sales tank.

Grow Your Dividend Portfolio with Scotts

A solid Q2 2025, with flat EBITDA and a 30% margin, proves Scotts’ grit despite a soggy spring. 

A 3% sales CAGR forecast, powered by housing starts and cost cuts, taps an $8 billion gardening market. With 50% of sales from Home Depot and Lowe’s, $400 million in free cash flow, and a 4.1% yield, Scotts is primed for growth, pushing margins to 20% by 2033. 

Its premium brands, like Miracle-Gro, keep it ahead, but Hawthorne’s cannabis bet could fizzle if legalization stalls. Still, including Scotts as part of a well-rounded portfolio is a strong long-term bet, capturing upside across a range of profitable growth sectors.