Although women have made tremendous strides in the area of gender equality as it relates to several socioeconomic spheres, much still remains to be done for women to achieve complete parity with their male counterparts. Investors can take the first step in furthering the movement by ensuring their investment portfolio is reflective of the power and potential of women.
Two companies are standouts in their equal opportunity initiatives for women. As outlined below, they have made great progress in their policies to prevent discrimination, programs to promote diversity and the representation of women on boards and high level management. Of late, there is a growing interest in gender-focused mutual and exchange-traded funds that screen for companies that promote gender equality. One such fund with this focus and includes women in their portfolio management team is also detailed below.
Microsoft Corp. (ticker: MSFT). According to Bloomberg, 43 percent of Microsoft executives are female, ranking among the top 5 percent of S&P 500 companies that report this data. Microsoft reports that 26 percent of its workforce is female and that there is no pay disparity when compared to their male counterparts.
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Looking at the financial side of the business, Microsoft has grown its operating cash flow from $17.8 billion in fiscal year 2007 to $43.5 billion in the most recent fiscal year. Its dividend per share has grown from 42 cents annually to $1.68 — an impressive growth rate of 15 percent per year. Cash, net of debt, has almost tripled. While the company isn’t immune from the economy, it has an entrenched customer base, which allows the company to extract a growing stream of cash flow from its customers.
J.P. Morgan Chase & Co. (JPM). More than half of J.P. Morgan’s employees are women, with 36 percent of them of executive level. In 2007, at the peak of the last economic cycle, J.P. Morgan reported a net income of $15.3 billion, or $4.31 per share. In 2017, the company reported its strongest profits to date: $22.6 billion dollars, or $6.97 per share. Dividends, currently at $2.24 per share, have grown 12.7 percent per year for the last five years and are currently yielding 2 percent.
From an income investor’s perspective, the dividend payout ratio has room to grow, as does the company’s buyback program. The valuation at 0.8 times the market also has growth potential, given the momentum in earnings and the dividend. In the wake of the recession, President Donald Trump promised to roll back part of the regulation that was imposed on banks in the months following, which may help banks close their valuation gap relative to the S&P 500.
Pax Ellevate Global Women’s Index Fund (PXWEX). One way to promote the value of female leadership is to invest in companies that do the same. Sallie Krawcheck, co-founder and CEO of Ellevest, spearheaded the creation of the first mutual fund that invests in the highest-rated companies in the world for advancing women. The mutual fund invests in brands that have strong female leadership and its holdings include many global, brand-name companies that appeal to a broad audience of investors.
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“Where these companies differentiate themselves, however, is with their success in advancing women in their ranks; for example, women hold 31 percent of board seats and 24 percent of senior management roles in companies in the fund, as compared to a global average of 11 percent,” Krawcheck says. “As women’s economic engagement and purchasing power continues to grow, we believe this type of senior-level diversity will matter even more.”
A 2014 Center for Talent Innovation research report, “Harnessing The Power of the Purse: Female Investors and the Global Opportunities for Growth,” noted that 90 percent of women globally said “making a positive impact on society is important,” and 77 percent of women globally — and more than half in the U.S. — mentioned they “want to invest in organizations with diversity in senior leadership.”
While these numbers show that diversity in the workforce is wanted and needed, the crux is the lack of females aspiring to powerful positions within the global workforce. In a similar report by the Center for Talent Innovation, “Women Want Five Things”, explores the disconnect between women’s expectations of a powerful job and the realities of one.
The study shows that women who have power in their current roles are more likely to get what they want from their careers than women without power. It takes a closer look at women’s professional wants, and consequently exposes their misunderstanding of power and the benefit it can bring.
Companies that develop and maintain pathways for leadership and break the misconception of what it takes to be ambitious should benefit financially.
Microsoft, J.P. Morgan and The Pax Ellevate Global Women’s Index Fund are just a few of the options investors may want to consider adding to their portfolio with the goal of supporting gender equality.
[See: These 7 Funds Make You Feel Good About Investing.]
Disclosure: Leslie Thompson and clients of Spectrum Management Group own MSFT and JPM.
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How Investors Can Support Gender Equality originally appeared on usnews.com
