NIC Inc: Should You Add This Pot Stock to Your Portfolio?

With federal cannabis descheduling becoming more likely, pot stocks continue to garner interest from investors. With huge potential upsides, investors continue to search for the pot stocks that will have massive returns. Amid the pandemic, SaaS (software as a service) companies have gained new momentum. Ongoing digital transformations such as remote working, online learning, or even online diagnosis have become the new normal. Thus it is an ideal time to invest in software stocks. NIC Inc. (NASDAQ: EGOV) is a US-based government digital service provider. NIC supports the US government in providing internet-based services across the US. Its portal designed for helping government regulate the marijuana industry makes it a very valuable stock in the cannabis industry. But should you add NIC Inc pot stock to your portfolio?

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NIC: Regulating Cannabis

Waves of marijuana legalization across countries and states make it a sector to continue to pay attention to. When new states and countries legalize it’s typically followed by plenty of paperwork, including licensing. After the passing of the Farm Bill 2018, NIC acquired Complia, a platform that specializes in hemp and cannabis licensing technology to help the US government in regulating the rapidly growing marijuana industry.

Since then, it has been providing customized licensing services as per the requirements of the state and local governments as cannabis legalization continues to spread across the nation. The cannabis industry is highly complex with each state operating within a unique set of laws; it requires intense scrutiny to codify the changing regulations and incorporating them into the already existing system. NIC has been handling it well by providing a stable platform with a high level of security.

Now, after the government has voted to decriminalize marijuana by removing it from the controlled substances act and authorized a 5% tax on it, this platform is going to prove extremely beneficial for the company in the coming months, thus providing it steady revenues.

Excellent Portfolio of Services for this Pot Stock

NIC has benefitted immensely from the accelerated growth in digital governance. It gained a huge appreciation for actively helping people in dealing with the disruptions caused by the pandemic through platforms like payment solutions, CheckFreePay, property tax payment in cash, etc.

It also collaborated with Microsoft to accept online appointments for a variety of services through its platform TeleGov. However, its new contract wins across the state of Florida and Iowa remains the key catalyst for its notable growth.

Another praiseworthy strategy was the partnership with Impact Health and NEXT Marketing for COVID testing. As a result, its earnings estimates for the current year received a healthy 3.6% bump in the past month. Finally, its outdoor recreational platform in Pennsylvania and Illinois which would be going live from the first quarter of 2021will be adding to its continued growth.

Attractive Dividends from NIC

Investors have a special place in their hearts for stocks that provide routine dividends and NIC is one such stock. NIC’s dividend payments have always been covered by both profits and free cash flows. By looking at the last 10 years’ data we can see the company has been steadily growing its dividend payments at 1.8% every year.

Its current earnings also confirm the future dividend payments would also be sustainable. NIC has been maintaining a modest payout of 39% keeping a sufficient amount for reinvestment purposes. Also, it has been generating sufficient free cash flows to fund its dividends.

Last year it paid out 44% of its free cash flows as dividends. The company has strong prospects and its earnings have been growing at a rate of 8.6% for the past 5 years. By retaining a majority of the profits, it has successfully grown its earnings with the retained capital. All this makes NIC quite an attractive option and certainly one pot stock to consider adding to your portfolio.

NIC Inc: Should You Add This Pot Stock to Your Portfolio?

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NIC Inc: Should You Add This Pot Stock to Your Portfolio?