First, permit me to clear the air.
My concept of socially responsible investing is diametrically opposed to the pervasive concept of socially responsible investing. From my perspective, to invest responsibly is to invest in companies that produce products and services people willingly purchase in a free market.
To invest in companies spawned by the seed of political patronage – subsidiaries, tax credits, tariffs, or other bestowed privileged – is socially irresponsible. Because taxpayers are forced to support these follies, society is harmed. Profits, if any, are more fiction than fact (see Solyndra).
Therefore, my socially responsible investment portfolio would exclude $100,000 electric car companies, condor-shredding windmill farms, land-gulping solar-powered utilities. On equal footing with free-market competition, these companies’ heads would be handed to them on the proverbial silver platter.
My contrarian (and I’ll even concede to ornery) nature guides me to three socially responsible income investments that cause conventional socially responsible investors to shutter. These investments are socially responsible because they generate profits – a sign of value creation – by satisfying legitimate demand. No political patronage is needed; none is necessary.
Better yet, they create value for investor and customer alike, and they do it consistently. What could be more socially responsible?
1. Altria (NYSE:MO)
My first socially responsible investment is the most socially irresponsible investment to conventional thinkers. Altria (NYSE: MO) is the large cigarette manufacturer in the United States. Its Marlboro brand controls over 40% of the U.S. market. Its Skoal and Copenhagen brands dominate the smokeless tobacco market.
Altria is positioning itself to similarly dominate the burgeoning e-cigarette market, which is expected to challenge the conventional cigarette consumption within a decade. With its recent acquisitions of MarkTen and Green Smoke brands, Altria is moving to the head of the pack.
You might personally dislike cigarettes (as I do), but you have to personally like 45 years of dividend growth, a 4.5% current dividend yield, and 55 years of near-20% average annual returns.
2. Ruger (NYSE: RGR)
Self-defense of person and property protection are inalienable human rights, and Ruger (NYSE: RGR) is a leader at enabling people to defend person and property. Ruger is the largest publicly traded gun manufacturer, with over 400 gun variations.
Ruger’s business has boomed in recent years: Sales have more than doubled since 2009, posting at $688 million 2013. EPS over the same period increased to $5.58 from $1.42 in 2009. As for the per-share dividend, it has increased to $2.12 from $0.31
I don’t expect sales to double again in another four years, but business will remain brisk, which will allow Ruger to continually increase a dividend that already yields 3.8%.
3. Natural Resource Partners (NYSE: NRP)
The world runs on cheap, efficient fuel, and no fuel is cheaper than and as efficient as coal – the second-most consumed energy source in the world. Coal is the go-to energy source in electricity generation. It is the fuel that enables the owners of the $100,000 electric car to charge their toy at a tolerable cost.
In our own backyard, coal is reclaiming lost ground due to natural gas prices rising to a four-year high. Within three years, coal’s share of power production is expected to claw back to 40.3% from 39% in 2013, according to the U.S. Energy Information Administration.
This is good news for Natural Resource Partners (NYSE: NRP), a coal royalty trust that owns an array of coal and oil & gas properties across the United States.
Natural Resource Partners is unique in that it doesn’t actually mine coal, it leases its properties to miners that perform the physical extraction. Natural Resource Partners’ structure ensures costs remain low and margins high: operating and net profit margins of 63% and 54%, respectively. This is the stuff traditional miners can only dream of, as is the company’s 8.9% yield.
I consider myself a socially responsible investor. Then again, what’s “socially responsible” is in the eye of the beholder. In my eyes, these three high-yield investments are socially responsible because they are likely to enable you to direct your income and proceeds to what you believe is socially responsible.
Deepwater Drilling for Dividends
Discover a company that’s drilling into the largest oil reserve in the Western Hemisphere… deep under the Atlantic Ocean. With every barrel of crude oil that it unearths is adds to the massive dividends that it pays its savvy investors. This is the only company that has the high-tech rigs and the sole rights to drill the “Saudi Arabia of the Sea.” And the best thing is…It’s paying out bigger dividend than Exxon and BP. It’s highly profitable and rewards shareholders with unannounced “bonus” dividends. And it pays them out every quarter. That’s on top of its regular, scheduled dividends — meaning shareholders are collecting 8 dividend payments a year, all from this one investment.