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Ethical Investing, Lesson 5: Changing the World, One Car at a Time

|Includes: Toyota Motor Corporation (TM)

I've been taken to task by some of my fellow environmentalists for driving a Volvo instead of a hybrid. When my old car died in early 2005, my first choice was the Toyota Prius. However, the waiting lists were very long, and there was the pesky matter of needing to get to work in the meantime. I opted for a Volvo instead. When it's time for a new car, I'll finally get that Prius. Toyota has sold more than one million Priuses to date in the United States alone, and will probably sell another million before we know it.

 

Toyota Motor Corporation (NYSE: TM) is a fantastic company for ethical investors. They plan to make a hybrid option for every model they produce by 2030, and have relentlessly pursued ways to make their vehicles greener and more efficient. Plug-in hybrids and all-electric models are currently being developed, and would likely sell very well due to rising gas prices and growing environmental concerns. The company also makes and converts vehicles for handicapped consumers. Toyota's values include respect for and development of employees, and they receive generally good reviews on glassdoor.com. Unsurprisingly, Black Enterprise magazine recently named Toyota on its annual "40 Best Companies for Diversity" list. Toyota is also a philanthropic company, supporting literacy programs, scholarships, the National Underground Railroad Freedom Center, and the Toyota Technological Institute. Their employees in Japan have generously donated to tornado relief efforts in Alabama and Mississippi, despite the fact that the Japanese factory was negatively affected by the earthquake and tsunami not too long ago. Remember the recent ads inviting the public to suggest new uses for technology Toyota developed? The company doesn't just make cars - they are actively committed to improving the world.

 

Despite flurries of bad news, including yesterday's recall of half a million vehicles, Toyota's financial position is stable. The company does have $147 billion in debt to $39 billion in cash, but with an EBITDA of $16 billion and gas prices continuing to rise, I consider Toyota's debt acceptable. The demand for hybrids will continue to grow, and even Toyota's non-hybrid vehicles will continue to sell well because they are efficient, safe, reliable, and affordable.

 

Toyota stock isn't for cheapskates, but at the moment it is significantly lower than its 12-month high of $93.45. Today's price of $64.12 isn't at all bad. Although the trailing P/E is 38.9, the forward P/E is a very acceptable 14.6. I believe Toyota will come back, and ultimately dominate the global auto market. Therefore, now is a good time to invest for the long term.

 

Toyota makes great cars, is a good employer, donates generously to a variety of good causes, and has done more for the environment than any other automaker. Their excellent work will keep them on top, and patient ethical investors can expect to share in the rewards.