5 Socially Responsible Companies with Great Dividends

Karin is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

How can you reconcile a desire to buy good stocks, with a desire to buy stock in a company that does good? I believe you can find both, by looking at companies that are labeled as socially responsible, that also pay excellent dividends.

I took a look at 25 companies listed by Dividend Channel as being socially responsible, which is generally defined as a company having corporate practices that promote such issues as environmental stewardship, consumer protection, human rights, and diversity. This category also usually excludes businesses involved in alcohol, tobacco, gambling, pornography, weapons, and/or the military.

I came up with five companies that yield over 3% from that list, so I decided to take a closer look at those five.

The first company on the list is NextEra Energy (NYSE: NEE). While an energy company may not be your idea of socially responsible, please keep in mind that NextEra is one of the leading clean energy companies in the country, and the largest generator of renewable energy from wind and solar in North America.  In 2011, the company was ranked among the Top Ten companies in the world for Social Responsibility by Fortune Magazine, and Number One in the Energy sector.

NextEra is currently trading at $71 per share and yields 3.4%. The company has been paying and raising dividends for 18 years, and has a 5-year DGR (Dividend Growth Rate) of 7.9%. The PE is 13.3, and the twelve-month total return is 27.5%. The payout ratio is a sustainable 46%, so the dividend appears secure even in the event of an earnings decrease. The company is currently trading at just less than its 52-week high; I include this information because I know that many investors do not like to buy at a 52-week high, but instead like to wait for a slight pull-back of the price.

The 23 analysts who cover the company rate the stock a 2.3 (1.0 = Strong Buy, 5.0 = Sell) with 4 Strong Buys, 9 Buys, and 10 Holds. They have set a one-year target price on the company of $72.94. The Motley Fool community rates NEE a five-star CAPS pick, with 1070 Bulls and 31 Bears (97% positive sentiment).

NextEra Energy scores a 16 on my ratings system, which is high enough for it to be more thoroughly considered for my Dividend Portfolio. (In my scoring system, companies which get 14 points or fewer are too low, 15 to 16 points are on the edge, and 17 points or better will definitely be included in the portfolio.)

The next company is Johnson & Johnson (NYSE: JNJ). Johnson & Johnson is trading at $71 per share and yields 3.4%. The company has been paying and raising dividends for 50 years, and its 5-year DGR is 8.0%. Its PE is 23.2, and its twelve-month total return is 15.3%. The payout ratio is somewhat high at 80% (I like to see 60%or less). The company is currently trading at just less than its 52-week high.

The 26 analysts who cover the company rate the stock a 2.3 with 6 Strong Buys, 8 Buys, 11 Holds and 1 Underperform. They have set a one-year target price on the company of $75.41. The Motley Fool community rates JNJ a five-star CAPS pick, with 13,545 Bulls and 494 Bears (96% positive).

Johnson & Johnson scores an 11 on my ratings system, which is too low to qualify for my Dividend Portfolio. However, in terms of a dividend-payer, I think it is a very good addition to a socially responsible portfolio.

Next up is Procter & Gamble (NYSE: PG). Yielding 3.2%, P&G is currently trading at $70 per share.  The company has been paying and raising dividends for an astonishing 56 years, and has a 5-year DGR of 9.9%. The PE is 19.4, and the twelve-month total return is 9.4%. The payout ratio is high at 73%. The company is currently trading at just less than its 52-week high.

The 24 analysts who cover the company rate the stock a 2.2 with 6 Strong Buys, 6 Buys, 11 Holds and 1 Underperform. They have set a one-year target price on the company of $74.79. The Motley Fool community rates P&G a four-star CAPS pick, with 7413 Bulls and 251 Bears (97% positive).

P&G scores only a 13 on my ratings system, which is too low to qualify for my Dividend Portfolio. However, in terms of a dividend-payer, it would be a very good addition to a socially responsible portfolio.

PepsiCo (NYSE: PEP) is currently trading at $70 per share and yields 3.0%. The company has been paying and raising dividends for 40 years, and has a 5-year DGR of 7.5%. The PE is 18.6, and the twelve-month total return is 9.8%. The payout ratio is reasonable at 57%. The company is currently trading at 5% less than its 52-week high.

The 18 analysts who cover the company rate the stock a 2.2 with 3 Strong Buys, 8 Buys, and 7 Hold. They have set a one-year target price on the company of $76.54. The Motley Fool community rates PEP a four-star CAPS pick, with 4397 Bulls and 151 Bears (97% positive).

PepsiCo scores only a 13 on my ratings system, which is too low to qualify for my Dividend Portfolio. However, as a dividend-payer, it is a very good addition to a socially responsible portfolio.

The last company on my list is McDonald’s (NYSE: MCD)but you may not agree with its definition as a socially responsible company if you hold the belief that fast food restaurants have contributed to the obesity epidemic in this country.  The company is currently trading at $90 per share and yields 3.4%. The company has been paying and raising dividends for 36 years, and has a 5-year DGR of 15.5%. The PE is 16.9, and the twelve-month total return is a loss of 6.5%. The payout ratio is reasonable at 50%. The company is currently trading at 5% less than its 52-week high.

The company rates a 2.2 among the 30 analysts who cover it, with 4 Strong Buys, 13 Buys, 12 Holds, and 1 Underperform. They have set a one-year target price on the company of $97.30, which is a potential gain of 8%. The Motley Fool community rates MCD a five-star CAPS pick, with 5892 Bulls and 292 Bears (95% positive.

McDonald’s scores a 16 on my ratings system, which is on the edge in terms of qualifying for my Dividend Portfolio.  I think it is an excellent addition to a socially responsible dividend portfolio.

In conclusion, the only company that meets the strict criteria for my Dividend Portfolio is NextEra Energy, and I will be keeping an eye on McDonalds. The remaining companies are all excellent in terms of dividend-paying history and potential, and I completely endorse them for Socially Responsible portfolios.

 

 


khern0203 has no positions in the stocks mentioned above. The Motley Fool owns shares of Johnson & Johnson, McDonald's, and PepsiCo. Motley Fool newsletter services recommend Johnson & Johnson, McDonald's, PepsiCo, and The Procter & Gamble Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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