Best Impact Investing Stocks With Dividends

By: Andrew McShane

Impact Investing now accounts for over 30% of assets under management and it's growing. Here is how you can find the best impact investing stocks with dividends and our top 3 picks.

You are about to learn...

  • An Impact Investing Refresher
  • The Growth of Impact Investing
  • 3 of the Best Impact Investing Stocks with Dividends

Impact investing isn’t just a way to make investors feel warm and fuzzy. Investors stand to make major profits off impact investing, and as larger, dividend paying companies adopt ESG criteria (Environmental, Social, Corporate Governance), the opportunity to drive additional income through impact investing is becoming a top focus. So, let’s look at some of the best impact investing stocks with dividends so you can boost the returns in you portfolio in 2021.

What is Impact Investing?

You can participate in the trend of social impact investing by buying individual stocks. Or you can participate by buying impact investing funds through most of the major brokerage houses.

Impact investors would rather invest in renewable energy companies than fossil fuel companies. The fossil fuel companies are likely to make more profit than the renewable energy companies. But the damage to the planet caused by getting the raw materials out of the ground and then consumed by the end user is massive.

Impact investing, sometimes referred to as ESG – Environmental, Social and Governance, is an investing strategy of only investing in a company if it is doing more that trying to make profits for the shareholders. Impact investors demand a positive social and environmental impact alongside a financial return.

Impact investing believers insist that the companies they invest in pay as much attention to helping the planet and the people in the communities they serve as they pay attention to trying to make profits.

The Growth of Social Impact Investing

Some recent studies indicate that impact investing accounts for 33% of all assets under management. And those numbers seem to be growing ever year.

Investors have always insisted on a reasonable financial return on their investment. But the idea of responsible investing is a newer trend that is here to stay.

A growing number of pension funds, as well as individuals, are investing only in companies that also generate a positive social and environmental impact.

But particularly as you get closer to retirement age you do not want to sacrifice periodic dividends in order to participate in the social impact investing trend.

Is it possible to find socially responsible businesses having a positive impact on our planet and the people in the communities they serve AND pay a safe, rising dividend to shareholders?

How to Find Impact Investing Dividend Stocks

The answer is a definitive yes, but you need to carefully screen companies to make sure they have a positive social impact alongside a reasonable financial return that includes a dividend payment.

Let’s talk about the criteria we use to find high quality impact investing businesses that also pay a safe and growing dividend.

Start by developing an impact measuring tool that helps you evaluate if the business is doing enough for you on social and environmental issues:

  • Does the business have a carbon neutral footprint using renewable energy sources?
  • How many high-quality jobs does the business support?
  • Does the business empower women and/or minorities?
  • How much does the business support the communities its sells into via charitable work, etc.?

To the above criteria you can add further filters related to the dividend, such as:

  • Does the business pay a dividend?
  • Has the dividend been paid for at least ten consecutive years, preferably being increased annually?
  • Is the dividend payout ratio less than 50%? The dividend ratio is the annual dividend divided by the earnings per share. A ratio above 50% is an indication that the dividend may be too high relative to the earnings of the business.
  • Is the business well-capitalized? A company with too much debt relative to its equity may not be able to continue paying its dividend in the future.

Putting businesses through the above funnel of questions will eliminate a lot of companies and leave you with the highest quality dividend paying companies that will give an impact investor a good return over the long run.

Here are three examples of the best impact investing stocks with dividends that meet the criteria described above. I don’t know what the returns of these companies will be over the short run, but I would expect over the long run the total returns of these three would exceed the S&P 500 index.

Top Impact Investing Stocks with Dividends

Microsoft (MSFT)

top impact investing stocks with dividends

Many people remember how Microsoft started with its founder Bill Gates developing the Windows software that ran many of the first personal computers.

Over the years Microsoft has diversified into brands like LinkedIn and Xbox. But the latest high-flying business for them is Azure, its infrastructure as a service business.

Microsoft’s financial results are second to none with a fortress balance sheet and a market capitalization of $1.7 trillion. They pay a dividend that yields just above 1%, with a super low payout ratio of approximately 30%.

And Microsoft can achieve their financial results while also balancing the needs of the people and planet. As an example, one of their pledges is to be carbon neutral by 2030. Microsoft is doing this not because it must, but because it thinks it is the right thing to do.

Home Depot (HD)

Home Depot is a retailer selling building materials and home improvement products to contractors and the do-it-yourself market.

Annual sales over $100 billion, growing profits and a strong balance sheet are the result of strong execution. Home Depot pays a dividend that yields 2.2% and is raised on a regular basis.

However, Home Depot is also taking care of the planet and the communities that it serves. It publishes periodic sustainability reports indicating how they are reducing carbon dioxide emissions, reducing energy use at its stores and increasing recycling efforts.

Equinix (EQIX)

Equinix operates as a real estate investment trust to provide data center services to its customers.

Their market capitalization of $60+ billion is supported by solid and growing profits.

Their dividend payment equates to a yield of 1.5%, which has been increased each of the last five years.

Although Equinix is well known for its financial results, it is less well known for its sustainability efforts. They are decreasing their reliance on fossil fuels and increasing their use of renewable energy. In 2019 they achieved 90% renewable energy use, which was up from 34% in 2015.


It is possible to find companies that pay a dividend and also take seriously their role in protecting our planet and helping people in the communities they serve.

Use the criteria above to help you identify these kinds of companies during your research process.

The three business examples will help you get started in your investment journey.

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