Dividend Investing and Socially Responsible Investing (SRI)

Investing has always been about balancing risk and return, but in recent years, investors have shown increased interest in investing with a social conscience. Two investment approaches that have gained popularity among investors are dividend investing and socially responsible investing (SRI).

Dividend Investing

Dividend investing is all about investing in companies that pay out dividends to their shareholders. Dividends are a portion of a company’s profits that are distributed to its shareholders on a regular basis. Dividend stocks are popular with income-seeking investors because they provide a steady stream of income. By focusing on companies that pay dividends, dividend investors can earn a regular income while participating in the growth potential of these companies.

Dividend investing is seen as a relatively low-risk approach to investing because companies that pay dividends tend to be well-established, financially stable, and have a consistent track record of profitability. This makes them less likely to experience significant drops in stock price or go bankrupt, which means that dividend-paying companies offer a level of stability that other stocks may not.

Socially Responsible Investing (SRI)

SRI, also known as sustainable investing and ethical investing, is an investment approach that involves investing in companies that are considered socially responsible or environmentally friendly. SRI investors look for companies that are actively working to address social or environmental issues, such as climate change, gender equality, and fair labor practices. By investing in socially responsible companies, these investors hope to make a positive impact on the world while earning a return on their investment.

SRI has become increasingly popular among investors due to growing concerns about climate change, income inequality, and other social and environmental issues. In fact, a recent survey by Morgan Stanley found that 75% of investors are interested in sustainable investing, up from 65% in 2015.

Combining Dividend Investing and SRI

Many investors are now combining dividend investing with SRI to create a portfolio that provides a steady stream of income while also making a positive impact on the world. By investing in companies that pay dividends and are socially responsible, investors can achieve both financial and social returns on their investments.

One way to implement this approach is to look for companies that have a strong track record of paying dividends and also have high environmental, social, and governance (ESG) scores. ESG scores are a measure of a company's environmental, social, and governance practices and are used by SRI investors to evaluate the sustainability of a company's business practices.

Another approach is to invest in exchange-traded funds (ETFs) or mutual funds that focus on dividend-paying companies that are also socially responsible. These funds can be a good option for investors who want to diversify their portfolio without having to do extensive research on individual companies.

The Bottom Line

Investors have more options than ever before when it comes to investing with a social conscience. By combining dividend investing with SRI, investors can achieve both financial and social returns on their investments. Whether you choose to invest in individual dividend-paying stocks or socially responsible ETFs, the key is to do your research and choose investments that align with your values and financial goals.