Investing has Social Consequences Whether you Like it or Not

If you invest in dividend paying stocks like General Dynamics (GD) or Raytheon (RTN) you are contributing to genocide. Of course I am being overly dramatic, but a reader of the site named John made a very thought provoking comment on this post about investing in Exxon who was just added to the Dividend Aristocrats. He asked whether I considered the social consequences of my investing decisions when deciding to buy a stock. This is something I wrote about a couple of years ago and wanted to look at it again.

Historically, a number of the best dividend paying companies offered some of the best dividend yields around. Take Altria as an example. For years Altria sported a yield anywhere between 4% and 6%. The trouble was, as an investor you needed to be comfortable investing in a company that sold cigarettes and other tobacco products. The same thing can be said for companies such as Anheuser Busch who produces alcohol (i.e. drinking) related products (and is a Dividend Achiever) or CryptoLogic who are in the gambling business. Further evidence that investing in sin stocks can be seen by quickly looking at a chart comparing the S&P 500 and the Vice Mutual Fund, which as the name implies invests in stocks that are questionable to some. The chart clearly shows how well investing in these stocks has done:

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The rewards can be substantial for these stock over time especially if dividends are raised, but at what cost to society? I have my own views on investing in these stocks and don’t want to debate that here. Each investor needs to make this decision for themselves as it is very personal. What I do want to provide is some questions to ask yourself when deciding to buy any company, whether they are considered sin stocks or not.

1. If you buy this stock, will you be comfortable with the business they are in?
2. If you buy this stock, will you be proud to own it?
3. Are you comfortable with the negative social stigma the company may have?
4. Does investing in this stock go against your moral or spiritual beliefs?

Keep in mind that we are somewhat talking about getting emotions involved in investment decisions, which is rarely (never) a good idea. Be cautious about this and ensure you are considering all the facts before making your ultimate decision. However, you need to be comfortable with your decision and able to live with it so in this case I think it is ok to let your emotions creep in somewhat.

(Photo Credit: Helinton Oliveira)