Learn About Biblically Responsible Investing. What is it? What Companies are Good? Why is it hard work? Read Our Helpful 9 Part Guide.
Biblically responsible investing is possible for investors, but it is not always straightforward and certainly requires hard work.
What is Biblically Responsible Investing?
Biblically Responsible Investing (BRI) is a process of investing guided by Cristian values as described in the Bible. The Ten Commandments are a good reference. Companies committing fraud or producing products that kill are excluded, while companies that promote family values are good candidates for investment.
However, pursuing BRI is more difficult than one might imagine.
9 Steps To Biblically Responsible Investing
1. Why is Biblically Responsible Investing Difficult?
Following biblical principles is difficult for investors because corporations are secular organizations. In general, corporations emphasize profitability or products over ethical values.
It is essential to realize that a company’s primary mission is to make money for investors – not follow scripture. Consequently, it is usually hard to determine what ethical standards a company is pursuing. Merely reading a mission statement rarely helps because management often ignores them.
However, many companies follow Biblical teachings. Those companies are often hard to locate; because few corporations emphasize religious stands, or advertise ethical behavior. Furthermore, many companies that follow Biblical standards only demonstrate the values in their actions.
2. Defining What is Biblically Responsible Investing
Biblically responsible investing is complicated because Christians do not agree on Biblical standards. Different denominations, churches, groups, and individuals have widely divergent interpretations of the Bible.
For example, Christians” opinions differ on issues like gay rights, wages, unions, the environment, and foreign investments. Some Christians consider it wrong to invest in companies that promote gay rights, but others do not, for example. Other Christians find stores that open on Sunday troubling.
They often base the lists of anti-Christian companies found on companies” political stances rather than Biblical standards. In particular, American conservatives often list companies as “anti-Christian” for taking left-wing positions on issues.
The criteria used to brand a company anti-Christian often have little to do with the Bible. For example, some Christians boycotted the America retailer Target (NYSE: TGT) because it promoted gay rights.
Target engaged in no unethical behavior; it only took a stance on a political issue. Yet, some Christians branded Target anti-Christian. The dispute with Target was political, not biblical.
Refusing to invest in Target might be a mistake because it will pay a dividend of 64¢ on 10 December 2018. In particular, Target has experienced 50 years of dividend growth.
Target offered a dividend yield of 2.93%, an annualized payout of $2.56, and a payout ratio of 47.6% on 25 September 2018. Value investors like Target because it was trading for $87.89 a share on 26 September 2018.
Target is obviously an example of a company that pays a good dividend but fails to live up to some Christians” ideas of “biblical standards.” Therefore, politics complicate biblically responsible investing.
The situation at Target demonstrates why claims a company is not biblically responsible should be investigated. Good companies are erroneously accused of biblically irresponsible behavior for political reasons.
3. An Example of a Company that Follows Biblical Responsibility
An example of a company that follows Biblical standards without saying so is Axon Enterprise Inc. (NASDAQ: AAXN).
Axon is a weapons maker that manufactures the less-lethal Taser stun weapons for law enforcement. Therefore, Axon is trying to obey the Sixth Commandment–Thou Shall Not Kill. Purchasing Axon stock is potentially biblically responsible investing.
Axon tries to follow the Sixth Commandment by making weapons designed not to take human life. Importantly, Axon manufactures weapons for police whose job is to protect life and property, not the military.
Axon makes money; it reported a net income of $8.49 million, and operating income of $4.3 million and a gross profit of $63.14 million on 30 June 2018. Axon generated revenues of $99.23 million during the 2nd Quarter of 2018.
Unfortunately, no dividend information was available for Axon Enterprise on 26 September 2018. However, its stock was trading at $66.39 on that date.
Axon Enterprise reported a free cash flow of -$5.55 for the 2nd Quarter of 2018. Axon’s negative flow and lack of a dividend demonstrate the perils of Biblically-based investing. Companies that follow Biblical standards do not always make money.
An advantage to companies like Axon Enterprise is that the Biblical standard they follow is simple and easy to agree upon. However, Biblical standards are rarely as s simple as “Thou shall not kill.” That makes biblically responsible investing complicated.
4. Biblically Responsible Investing Opportunities
Fortunately, some stocks are viewed as biblically responsible investing by most Christians.
Pharmaceutical manufacturers are a glaring example of potentially biblically responsible stocks. Ideally, the pharmaceutical company’s mission is to manufacture drugs that save lives.
Obviously, some Christians might disagree with that assessment. Roman Catholics would undoubtedly consider a company that manufactures birth control products as not Biblically Responsible. However, many Protestants see nothing in scripture against birth control.
An example of a pharmaceutical maker, Christians can look at is Pfizer Inc. (NYSE: PFE). In particular, Pfizer was trading at $44.06 a share on 26 September 2018, but it paid a 34¢ dividend on 4 September 2018.
Pfizer shares offered investors a dividend yield of 3.09%, an annualized payout of $1.36, and a payout ratio of 45.5% on that day. Pfizer’s dividend has grown for eight straight years.
Future dividend growth is likely at Pfizer; because it reported revenues of $13.466 billion and revenue growth of 4.42% on 1 July 2018. Impressively, Pfizer reported a gross profit of $10.55 billion, an operating income of $4.527 billion, and a net income of $3.872 billion for the 2nd Quarter 2018.
Therefore, Pfizer is a perfect example of a company that meets some Biblical standards and makes a lot of money. Furthermore, Pfizer rewards its shareholders with growing dividends.
5. Why Biblically Responsible Investing is Complicated for Stock Investors
Pharmaceutical makers are a perfect example of the complications in biblically responsible investing. For example, the eighth commandment states, “thou shall not steal,” but does not define stealing.
In particular, many people accuse American pharmaceutical companies of stealing from the poor by continually and relentlessly raising prices on drugs people need to take to continue a good quality of life. The complication is that the companies are not overtly stealing. Instead, they are instituting questionable price increases.
Unnecessary price increases might violate Biblical Standards because of Leviticus 19:11. To demonstrate, that verse commands believers, “Not to steal money stealthily.”
Obviously, many people would classify unnecessarily raising drug prices as “stealing stealthily.” Under those circumstances, a lot of Christians will regard owning pharmaceutical stocks as biblically irresponsible investing.
6. An Example of Biblically Irresponsible Investing
An even greater dilemma for Christians is the American bank Wells Fargo (NYSE: WFC). Wells Fargo is an excellent dividend stock, it paid a dividend of 43¢ on 1 September 2018 but cost just $54.19 a share on 26 September 2018.
On the positive side, Wells Fargo offered a dividend yield of 3.17%, an annualized payout of $1.72, six years of dividend growth, and a payout ratio of 37.8%. On the negative side, the press accused Wells Fargo employees of opening two million fake bank accounts. Employees created phony bank accounts to generate sales commissions and bonuses.
Therefore, Wells Fargo explicitly violated Leviticus 19:11 by stealing stealthily. The Wells Fargo scandal raises serious questions for Christians about another ethical stock. Specifically, that stock is Berkshire Hathaway (NYSE: BRK.B).
Berkshire Hathaway reportedly owns 497.7 million shares of Wells Fargo stock. Under those circumstances, Warren Buffett is not a biblically responsible investor. Therefore, Berkshire Hathaway shareholders are not biblically responsible investors.
7. How can you be a Biblically Responsible Investor?
Biblically responsible investors need to do a lot of research.
The obvious lesson from Wells Fargo for biblically responsible investors is to do your research.
The biblically responsible investor needs to research far more than just a company’s financial information. For example, he or she needs to learn what products the company manufactures, promotes, and markets. By the same token, biblically responsible investors need to know what other companies an organization supplies or does business with.
For instance, a munitions maker that sells to foreign governments with records of killing civilians. That company is obviously in violation of the sixth commandment’s prohibition on killing.
Unfortunately, as Wells Fargo demonstrates, corporate violations of scripture are rarely simple or straightforward. Wells Fargo’s executives did not steal, but they encouraged their employees to steal stealthily and to lie. Christians will have to decide if that behavior is biblically irresponsible.
8. How can you Avoid Biblically Irresponsible Investing?
An excellent method of discovering sinful behavior at a company is to follow the news. Therefore, always run a news search on the company before you invest.
Searches are useful because violations of biblical standards usually make the news. Unfortunately, investment news sources often ignore corporate misdeeds that do not affect value.
Make sure you run searches on all companies, including those with reputations of having standards. The Wells Fargo scandal demonstrates that companies with high standards often violate them.
Biblically responsible investing is easy, but it involves a lot of work. Christians that do the work can do the right thing according to their conscience.
9. Biblically Responsible ETF / Mutual Fund
You can, however, let someone do the filtering of ethically challenging companies for you and use an exchange-traded fund to invest in all the companies at once. For example, the James Biblically Responsible Investment ETF is an innovative concept. The company filters out all U.S. companies that may engage in activity that is not deemed to comply with Christian morality, such as companies involved in abortion, adult entertainment, alcohol, tobacco, and gambling, according to the prospectus. Although Jesus did drink wine, so I am not sure why alcohol is excluded.
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Podcast 9 Steps To Biblically Responsible Investing
Learn About Biblically Responsible Investing. What is it? What Companies are Good? Why is it hard work? Listen To Our Helpful 9 Part Guide.
- Published: Tue, 26 Feb 2019 23:00:00 GMT
- Duration: 00:13:31