Last week, I started to discuss the topic of ethical investing. The point of my first post was to explain the definition of a socially responsible company. As capitalism has shown both its strengths and weaknesses, some investors are interested in companies that will not only produce great results for the next quarter or two but corporation that believe in sustainable business models. While no one is perfect, more and more companies are trying to become good corporate citizens. Is it just a marketing strategy to get more investors interested to buy their shares? I would bet that some investor relations’ departments have thought about this one. But in the mean time, these companies are trying to:
– Operate an ethical business (they follow laws and don’t touch controversial fields. They have a social consciousness while operating).
– Have ethical corporate governance (they are careful about how bonuses and salaries are distributed and how power is controlled within the corporation).
– Have a sustainable business model (they make sure that their business will be viable and profitable for several years to come).
– Take care of their employees and society in general (they don’t just follow the working norms but they are pioneers in terms of workers’ benefits, employees’ care and consideration. They also act as a citizen in our society and try to give back to their community).
So, I went to the different social indices (Dow Jones Sustainability Index, LOHAS, FTSE KLS 400 Social Index and the Calvert Social Index) and tried to pull out the maximum stocks that qualify under the different ethical criteria. It was not easy as the stock list is not always easy to find depending on the social index we are looking at. Some display their social stock lists on their website, others are more conservative with regards to their information sharing.
Socially Responsible Stock List that Pays Dividends:
Since we are talking about dividend investing on this blog, I have subtracted all the stocks that don’t pay dividends. On the other hand, this ethical stock list also contains some very low dividend payers as well. The point of today’s post was to provide you with the complete socially responsible stocks that pay dividends. Then, I’ll build an ethical portfolio with a high dividend yield in my 3rd post of this series.
US Socially Responsible Stock List with Dividends:
Canadian Socially Responsible Stock List with Dividends:
Hey Canadians, I didn’t forget about you ;-). In order to put together an interesting list of socially responsible stocks, I used the Jantzi index on the Canadian Market. Once we subtract companies that don’t pay dividends, you will see that you don’t have much choice…. Well it’s the dilemma of dividend investing in Canada anyways, right?
Are you surprised by this Stock List?
Interestingly enough, there seem to be some “errors” in the definition of socially responsible. I was surprised to see Nike and McDonald’s in the US stock list as well as Encana or Suncor that are heavily active in the oil sands industry. As I said before, nothing is perfect and social investment is still a matter of interpretation!
Next Step: Building a Socially Responsible Stock Portfolio That Pays Dividends
In Wednesday’s post, I will look at both the US and Canadian stock lists and pick the best shares with the highest dividend yields. I am curious to see if it’s possible to get good returns while investing ethically!
Interesting lists for certain. Brings me back to the oil/gas/distribution sector. A lot of these companies are the “best of the worst” so to speak in that they are much “greener” than their counterparts. However, these companies still produce mass amounts of waste and environmental destruction. Just over a month ago all those birds (hundreds) had to be put down after hitting an oil sand. I look forward to seeing your portfolio in a few days!
Yeah, I have cut most of them to make it more “socially acceptable”. The end result is pretty neat. I’m looking forward for your reaction on Wednesday!
Mike,
Check out Ecology and Environment (EEI). http://www.google.com/finance?q=NASDAQ:EEI
“Ecology and Environment, Inc. (EEI) is an environmental consulting firm. The Company has completed more than 50,000 projects for a variety of clients in 96 countries, providing environmental solutions. The Company has rendered consulting services to commercial and government clients in a variety of service sectors, such as energy, natural resource management/restoration, green programs, planning, emergency planning and management, hazardous material services, international and health sciences. ”
With a yield of 3.41% and having raised the dividend 17 times in the last 23 years this company seems to fit the dividend / socially responsible strategy.
In addition, EEI has the 10th highest Return on Assets in this segment of the market. Its ROA was 8.32% for the last 12 months. Its Asset Turnover ratio (revenue divided by assets) was 1.84 for the same period. EEI has raised dividends since 2006 (and I think I was incorrect on the Yield which might be 3.3%).
I really need to get my thoughts out at one time – apologies.
Where we struggle, as the theme of our blog, is being sustainable. Diversification in oil/gas/distribution makes sense as many of those companies are dividend aristocrats. Avoiding them seems contrary to the often repeated theme of diversifying where it makes sense to financially.
I will write more on our strategy on our blog but I think we’re going to take more of a “one bad apple, 10 good apples” approach for our portfolio. Attempting to achieve balance but still be able to sleep at night.
Does McDonald’s really count as a socially responsible company?
@ Evan,
I guess they treat their beef right
hahaha!
I won’t include it in my “ideal” portfolio tomorrow
Isn’t the better way to to do socially responsible investing would be to find companies that you don’t agree with that pay dividends (especially eligible Canadian dividends, if you are Canadian) and use any money they pay you to donate to registered charities that you support?
Technically you are taking the profits of evil and shifting them to good causes and getting preferential tax treatment on both ends. If you donate the money directly to causes that oppose the company you invested in you get the tax benefits while also hurting the company. This seems like epic win all around.
@Traciatim,
that’s an interesting point of view but I doubt will get much growth out of your portfolio if you spend all your dividends
@Evan – I see where you’re coming from, but in all honesty, if you check on what McDonalds is up to in foreign markets, you’d be surprised at just how ethically they conduct business. in other words…don’t hate the player – hate the game.