Green Dividend Stocks

Green Stocks That Pay Investors a Bonus

Written by Brian Hicks
Posted February 2, 2010

Now that the market has taken a sustained slide after a months-long bull run, more and more people are asking about safe green investments.

Specifically, they want to know about green dividend stocks.

Of course, dividend stocks are nothing new in the investment world. But in case you're not familiar, here's a brief recap.

What are Dividend Stocks?

When a company turns a profit, it has a few options:

  • It can pay down debt;

  • It can repurchase shares;

  • It can reinvest in the business; or

  • It can share the profit with shareholders.

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When a company chooses to share its profits with shareholders, it pays a dividend.

The dividend can vary in percentage and must be approved by the company's board of directors. The amount you receive is called a dividend yield.

My colleague Steve Christ succinctly described dividend yield in a recent Wealth Daily article:

Dividend yield is simply your rate of return from dividend payouts, exclusive of any stock price appreciation. It's calculated by dividing the dividends you receive over a year's time by the price you paid for the stock.

For example, your dividend yield is 5% if you paid $20 per share, and you receive $1 per share in dividends ($1/$20) over the 12 months following your purchase.

Dividend yield, however, is not a fixed number. It changes along with the share price. For instance, say someone else buys the same stock a week later when the share price had moved up to $25.

Instead of 5%, their dividend yield would only be 4% ($1/$25).

In short, it is a cash payout that you receive for simply being a shareholder, sort of like receiving a bonus based on a company's earnings.

What's more, dividends are taxed at a much lesser rate than other income.

During times of market angst, many investors turn to dividends because they are paid regardless of the stock's performance — especially if the company has a solid history of dividend payouts.

Are There Green Dividend Stocks?

When choosing a dividend stock, you'll want to look for its annual dividend rate. For most investors, the easiest way to do this is in the Key Statistics section on Yahoo! Finance. Take Emerson Electric (NYSE: EMR) for example, the smart grid and efficiency specialist...

You'll see that it pays a $1.33 annual dividend (Rate), or 3.2% (Yield) of the current share price. That means you get $1.33 per year per share. The Yield will change based on the stock price, but the Rate will remain the same, until changed by the board of directors.

Now, some green stocks are in nascent industries like wind and solar, and haven't yet established the constant earnings and cash flow required to offer a dividend. You're probably better served by checking out larger companies like utilities, water companies, and transmission and distribution companies.

Anything above 5% yield is pretty good, but you'll want to check the company's website to see its history of payouts. General Electric (NYSE: GE), for example, has been constantly decreasing its dividend.

Here's a brief list of green dividend stocks to get you started:

  • ABB (NYSE: ABB)

  • ESCO Technologies (NYSE: ESE)

  • Flowserve (NYSE: FLS)

  • Johnson Controls (NYSE: JCI)

  • Lindsay Corp. (NYSE: LNN)

  • Integrys Energy (NYSE: TEG)

  • Ormat Technologies (NYSE: ORA)

  • United Technologies (NYSE: UTX)

  • Veolia Environment (NYSE: VE)

Call it like you see it,

Nick Hodge

Nick