4 Stocks Cashing in on the Trend Towards Social Responsibility
Brenda is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Social responsibility has never been more critical than now to potential investors -- now more than ever, social pressures create upward or downward movement on individual securities. It pays to keep a careful eye on the social networking streams to see what is "in," and what is "out." Four choices that are "in" and show no signs of losing social clout or financial steam are profiled below.
Modernizing breakfast, and beyond...
Traditionally, General Mills (NYSE: GIS) hasn't been top of mind when social responsibility is discussed. For many years, General Mills pumped kids full of sugar, food dyes, and additives. Yet, this Foolish blogger sees the tides turning with this behemoth food company, as new gluten free offerings and reduced sugar cereals hit the grocery store shelves. The Green Giant now has steamed veggie entries that are faster to prepare than ordering a pizza, and General Mills now offers 300 products that have removed wheat as an ingredient.
And the new food offerings aren't the only thing that's healthy about General Mills. Long known as a blue chip, if somewhat unexciting stock, General Mills is one of the world's biggest food companies. Not only is this company big with respect to overall size, it is also big on strategy, execution, and vision. The company's dividend history reflects this overall fiscal health; the company has had fourteen dividend increases since 2004. From the company's blog, " If you had invested $1,000 in GIS in 1928 and held it through calendar year 2012, with dividend reinvestments, It would be worth more than $7M today".
The last announced dividend represented a 3.2% yield. Price performance is also strong, with a 26.8% increase in price over last year. The stock is now trading near its 52-week high, this Fool believes that it would be prudent to wait for one of the many market corrections we enjoy to happen, then to buy and hold with dividends reinvested.
The sun shines on NextEra
Florida-based NextEra Energy (NYSE: NEE) has provided investors with a 21.84% one year return, and 8.06% five-year dividend growth -- blasting any misconceptions that a green energy company can't be financially healthy. Named a Top 25 Socially Responsible Dividend Stock by Dividend Channel, the current dividend yield is 3.3%. This is a bit behind the energy industry's average of around 5%, but better than most tech stocks with no dividend.
NextEra is the number one producer of solar power in the U.S., and is definitely reaping the benefits of a $38 billion investment in modernized infrastructure and is passing these benefits on to its sizable customer base. Windpower is another key revenue and energy production area for NextEra, and it operates 100 wind farms in the U.S. and Canada. And it practices what it preaches -- the company's headquarters just received the coveted LEEDs Gold certification level -- only Platinum is higher. These certifications measure a building's impact on the environment, and overall sustainability.
One possible concern with NextEra (and the only negative comments that can be found on this stock's Foolish commentary section) is its dependence on government subsidies for solar power. What happens if they go away? Definitely something to be watched. Many of these subsidies governed the build out of wind power, and most of the needed capacity has already been built, so impact may not be as high as some fear.
In the meantime, the stock has a consensus analyst rating of Buy and a CAPS score of 5/5. One could say that the wind is blowing in the right direction for NextEra.
Lighting up homes with Cree
Trumping the humble compact fluorescent bulb in every way -- Cree's (NASDAQ: CREE) LED incandescent replacement bulb is 84% more energy efficient, lasts 10 years longer, and is brighter. The only down side is the price tag; but the amount of marketing dollars being spent could be a part of the cause for the sticker shock as well as the reason it will be overcome.
In the early days of LED technology, a vision that this lowered power lighting would become mainstream, ignited materials engineers' imaginations everywhere. A big barrier to this dream becoming reality was the lack of ability to create a blue LED -- in light technical terms, the bandgap that electrons had to cross was too wide and "traps" that existed due to "junk" that was unavoidable in production grabbed them before they got to the other side for the blue light wavelength.
The only way to fix this was to transcend the typical GaAs, or GaAsP (Gallium Arsenide or Gallium Arsenide Phosphide) materials technology that was used "back-in-the-day" (early to mid 1980s), when I was a young engineer with HP's Optoelectronics Division. Other technologies were developed, but they were impossible to mass produce cost effectively -- until Cree introduced the first mass-marketed blue LED in 1989. Thanks to Cree, LED lighting has now crossed the chasm from business use to residential use (for enlightened consumers who prefer a lower electric bill even if upfront costs are higher).
Perhaps, the smartest move this company has made was the acquisition of former HP Optoelectronics marketeer Mike Watson as VP of Marketing. Under the leadership of my former colleague, the company's visibility has improved 1,000% (all puns intended). A "LED Revolution" site now proudly documents all businesses and educational institutions that have jumped the gap from traditional lighting to LED lighting. This is one major reason why this Foolish blogger sees this stock as a wonderful buy.
This stock has returned 85% so far this year (as of June), and secured Home Depot as a distribution partner, a solid play.
As with all technology stocks, there is an element of risk. The P/E ratio of 111.8 tells us to tread carefully. We are also looking at a quick ratio of 5.6, showing us that Cree is heavily leveraged -- LED manufacturing technology is not cheap even today. Yet, Cree is just now beginning to reap the benefits of its consumer strategy, so this Fool is willing to take the risk (after a few more months of watching).
Google sets the stage for social responsibility
Perhaps, the strongest choice of the four, Mountain View, CA-based Google (NASDAQ: GOOG) is known for environmental consciousness, social responsibility, and employee satisfaction. A typical pick for socially responsible ETFs and mutual funds, Google runs its sites from wind and solar power and chooses renewable energy sources for its data centers.
The high profile corporation has a lofty goal of achieving 100% renewable energy for all facilities, according to Google Green -- the company's green energy website . The current figure is 30%, which can't even be closely matched by most of America's major corporations! Google has investments in these initiatives at present:
- Jasper Power Project: investing in South African solar
- Spinning Spur Wind Farm: investing in West Texas wind
- Rippey Wind Farm: financing wind power in Iowa
- Recurrent Energy: large scale photovoltaic (PV) projects in California
- Clean Power Finance: financing for rooftop solar
- SolarCity: solar for thousands of residential rooftops
- BrightSource: concentrated solar power at scale
- Atlantic Wind Connection: a superhighway for clean energy transmission
- Alta Wind Energy Center: harnessing winds of the Mojave
- Shepherd’s Flat: one of the world’s largest wind farms
- Peace Garden Wind Farms: opening up more financing for wind
- Photovoltaics in Germany: investing in clean energy overseas
The stock is a well-known blue chip, but is priced in the mid $800's per share - a price out of the reach of many investors. A way to invest in incremental shares is through Orange Sharebuilder, which allows you to invest in incremental shares (half a share, etc) as a part of its automatic investing scheme. The stock is trading at 26 times earnings now, so it is best to wait until a market correction happens, then pick some up.
In summary -- gone are the days when social responsibility meant limited returns. Some of the strongest companies, such as Google, are investing heavily in sustainability and working towards a green, healthy future. Given the social climate of today, it makes more sense to invest in companies that care about tomorrow than traditional companies who have a "make-our-number-this-quarter" mentality. That is exactly what this Foolish blogger intends to do.
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Brenda Johnson owns shares of Google. The Motley Fool recommends Google. The Motley Fool owns shares of Google. 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!