In this article, we will be taking a look at 10 ESG dividend stocks to buy. To skip our detailed analysis of dividend investing, you can go directly to see the 5 ESG Dividend Stocks to Buy.
With the rise of Corporate Social Responsibility (CSR) programs and a greater focus on the consequences of companies’ actions on our environment, a new trend has arisen in the world of investing. It’s called ESG investing.
What is ESG Investing?
ESG is the acronym for Environmental, Social, and (Corporate) Governance. These terms represent three categories of interest to investors who want to be socially responsible in their investing. For those investors looking to combine their values and morals with their financial investments, ESG stocks are thus becoming a valuable pick.
A joint report by Oxford University and Arabesque Asset Management, reviewing over 200 sources on ESG performance, found that in 88% of the research, ESG practices led to better operational performance for the companies studied. This in turn meant greater cash flows to the benefit of the companies and their shareholders, naturally.
Similarly, a 2021 report published by the Morgan Stanley Institute for Sustainable Investing also revealed that in the highly volatile year of 2021, funds focusing on ESG factors across stocks and bonds performed better than those that didn’t. The finding came about after analyzing over 3,000 US mutual funds and exchange-traded funds, or ETFs. Statistically speaking, sustainable equity funds outperformed their non-ESG counterparts by a median total return of 4.3% in 2020.
In light of the above, ESG stocks like Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), Gildan Activewear Inc. (NYSE:GIL), and Oracle Corporation (NYSE:ORCL) have become all the rage in investor circles. These companies themselves have ESG scores of 60, 74, 83, and 37 respectively, according to S&P Global’s ESG Score Tracker. The tracker rates companies on a scale of 0-100, with 100 being the best performance. Any ESG score above 50 means the company’s ESG rating is above average, and when the score crosses 70, the company’s ESG performance is considered to be on a positive rise relative to other companies.
Without further ado, let’s take a look at the 10 ESG dividend stocks to buy.
Photo by Max Harlynking on Unsplash
Our Methodology
Tracking 867 hedge funds in the third quarter, Insider Monkey has compiled the hedge fund data of these funds to determine which stocks are the most popular among them in 2021. We have used this data to pick popular dividend stocks, and have researched to pick stocks with stringent ESG policies.
We have mentioned ESG scores taken from S&P Global’s ESG Score Tracker where possible, and mentioned the stock performance for all companies mentioned below, as of late December. The ESG Score Tracker considers data showing companies’ progress in transitioning to low-carbon, sustainable, and equitable business practices.
To reiterate, the tracker rates companies on a scale of 0-100, with 100 being the best performance. Any ESG score above 50 means the company’s ESG rating is above average, and when the score crosses 70, the company’s ESG performance is considered to be on a positive rise relative to other companies.
ESG Dividend Stocks to Buy
10. QUALCOMM, Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 70
Dividend Yield: 1.5%
ESG Score: 56
QUALCOMM, Incorporated (NASDAQ:QCOM), an information technology company, develops and commercializes foundational technologies for the global wireless industry. The company has been raising its dividend for 11 years, and with an ESG score above 50, it is among the best stock picks for those seeking ESG dividend stocks to buy.
This December, JPMorgan’s Samik Chatterjee reiterated an Overweight rating on QUALCOMM, Incorporated (NASDAQ:QCOM) shares.
In the fiscal third quarter of 2021, QUALCOMM, Incorporated (NASDAQ:QCOM) had an EPS of $2.55, beating estimates by $0.29. The company’s revenue was $9.32 billion, beating estimates by $476.91 million.
By the end of the third quarter of 2021, 70 hedge funds out of the 867 tracked by Insider Monkey held stakes in QUALCOMM, Incorporated (NASDAQ:QCOM) worth roughly $3.5 billion. This is compared to 72 hedge funds in the previous quarter with a total stake value of approximately $4.04 billion.
Like Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), Gildan Activewear Inc. (NYSE:GIL), and Oracle Corporation (NYSE:ORCL), QUALCOMM, Incorporated (NASDAQ:QCOM) is a stock with a strictly implemented ESG policy.
9. NextEra Energy, Inc. (NYSE:NEE)
Number of Hedge Fund Holders: 53
Dividend Yield: 1.8%
ESG Score: 86
NextEra Energy, Inc. (NYSE:NEE) is a utilities company that generates, transmits, distributes, and sells electric power to retail and wholesale customers in North America. The company has one of the highest ESG scores on our list.
In December, BMO Capital’s James Thalacker reiterated an Outperform rating on NextEra Energy, Inc. (NYSE:NEE) shares.
According to the company’s earnings report for the fiscal third quarter of 2021, its EPS was $0.75, beating estimates by $0.03. Its revenue was $4.37 billion.
Our data shows 53 hedge funds long NextEra Energy, Inc. (NYSE:NEE) in the third quarter, with a total stake value of $2.4 billion. The largest stakeholder for the quarter was Fisher Asset Management, holding 14,593,162 shares worth $1.1 billion.
8. Goldman Sachs Group, Inc. (NYSE:GS)
Number of Hedge Fund Holders: 74
Dividend Yield: 2.1%
ESG Score: 50
Goldman Sachs Group, Inc. (NYSE:GS) is a financial institution providing financial products and services worldwide. The company has an ESG score of 50 according to S&P Global’s ESG Score Tracker.
Morgan Stanley’s Betsy Graseck upgraded Goldman Sachs Group, Inc. (NYSE:GS) shares this December from Underweight to Equal Weight.
Out of 867 hedge funds, 74 hedge funds held stakes in Goldman Sachs Group, Inc. (NYSE:GS) in the third quarter. Comparatively, in the second quarter 61 hedge funds held stakes in the company worth $5.2 billion, while the total stake value in the third quarter was $5.5 billion.
7. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 40
Dividend Yield: 2.4%
ESG Score: 53
Texas Instruments Incorporated (NASDAQ:TXN) is an information technology company that specializes in manufacturing and selling semiconductors to electronics designers and manufacturers across the globe. The company’s ESG score according to S&P Global is 53, making it one of the top ESG dividend stocks to buy. It operates through its Analog and Embedded Processing segments.
William Stein, an analyst at Trust, reiterated a Hold rating on Texas Instruments Incorporated (NASDAQ:TXN) shares this October.
According to our third quarter 2021 hedge fund data, 40 hedge funds held stakes in Texas Instruments Incorporated (NASDAQ:TXN) worth $1.9 billion in this last quarter. In the second quarter, 50 hedge funds held stakes in the company worth $2.5 billion.
Davis Funds, an investment management firm, mentioned Texas Instruments Incorporated (NASDAQ:TXN) in its third-quarter 2021 investor letter. Here’s what they said:
“Semiconductor-related holdings currently include Texas Instruments. While each of these businesses is unique, they serve fast-expanding global end markets ranging from e-commerce and AI to cloud computing, mobile technologies and electric vehicles—a set of market opportunities that dwarf this industry’s historical legacy markets in more mature sectors, such as PCs and mobile devices. We are excited by these new, long-tailed areas of future growth for this set of well-resourced, innovative hightechnology companies. In our view, best-inclass operators have successfully made the transition from what were historically cyclical businesses to “growth cyclicals” over the coming decades. Products today are harder to design and manufacture, let alone source given a strained supply chain, making chips more valuable today than before—in some cases by multiples of past pricing. In addition, financially savvy managements have created value by retiring large percentages of their companies’ shares when their stocks were cheap, with some retiring 20–35% over the last seven years alone.”
6. Cabot Corporation (NYSE:CBT)
Number of Hedge Fund Holders: 17
Dividend Yield: 2.4%
ESG Score: 68
Cabot Corporation (NYSE:CBT) is a specialty chemicals and performance materials company. It offers reinforcing carbons for use in tires, alongside products such as hoses, belts, and molded goods. The company’s ESG score of over 60 makes it a noteworthy option for those seeking ESG dividend stocks to buy.
Barclays analyst Michael Leithead holds an Overweight rating on Cabot Corporation (NYSE:CBT) shares as of this December.
The company’s fiscal fourth quarter of 2021 report shows an EPS of $1.11, beating estimates by $0.08. Its revenue was $904 million.
Cabot Corporation (NYSE:CBT) was among the more popular dividend stocks with hedge funds in the third quarter, with 17 hedge funds long the stock with a total stake value of $64 million. Arrowstreet Capital was its largest shareholder this quarter, holding 326,888 shares worth $16 million.
Like Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA), Gildan Activewear Inc. (NYSE:GIL), and Oracle Corporation (NYSE:ORCL), Cabot Corporation (NYSE:CBT) is a stock investors can pick for both profit and sustainability.
Click to continue reading and see the 5 ESG Dividend Stocks to Buy.
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Disclosure: None. 10 ESG Dividend Stocks to Buy is originally published on Insider Monkey.
