This Coffee Stock Makes Money... The Right Way

Consumers are becoming more and more socially conscious, and want the goods and services they use to measure up. In truth, it really doesn't take much. A simple action that costs a company very little or nothing at all can make a real difference in the mind of the consumer.

Often, the added expenses from paying workers a little more, monitoring resource sourcing, or going the extra ethical mile are small downsides when compared to the huge potential upside. And where there's company upside, there's investor upside. Starbucks (Nasdaq: SBUX  ) is just such a company. Let's dive deep into the ubiquitous coffee purveyor, evaluate its socially conscious policies and practices, and take a hard look at the numbers. We'll evaluate how it's performing as a business, an investment, and as a socially conscious enterprise.

Going the distance
"Starbucks has social responsibility at its core." So says Rising Star portfolio manager and longtime Fool analyst Alyce Lomax. And she's right. Visit starbucks.com and you'll find a section titled "Responsibility." In it you'll find a long list of socially responsible corporate policies and practices that Starbucks follows. For example:

• Over the past decade, in cooperation with Conservation International, the company has developed a strict set of coffee purchasing guidelines, called "Coffee and Farmer Equity Practices," or C.A.F.E. Starbucks bought 269 million pounds of coffee in 2010, 84% of that from C.A.F.E.-approved suppliers.
• The company follows a similar set of guidelines in the sourcing of its teas, its cocoa, and virtually anything else that makes its way into a Starbucks, down to the chairs customers sit on.
• Starbucks also sells Fair Trade Certified coffees right alongside its own ethically sourced beans. The company began purchasing Fair Trade Certified coffee in 2000, helping grow the market, and therefore awareness, for it in the U.S. 
• Front-of-house recycling became a reality in several markets in 2009. And the company goes so far as to hold "Cup Summits," which bring together key players in the supply chain to foster cooperation and improve the recycling process.

This is just a small sample of what Starbucks is up to. There's no question that the company goes the distance in the effort to be socially responsible; the philosophy goes hand in glove with the business model. Now let's take a look at the numbers and see how the company and the stock are performing.

A record quarter
Starbucks' most recent quarter ended Oct. 2; the company is reporting record numbers:

• Comparable-store sales grew a big 10%, versus McDonald's (NYSE: MCD  ) normally enviable 5%.
• Total net revenues hit a record $3.0 billion, increasing a healthy 7% year over year.
• Net earnings jumped a staggering 28.5% over last year, versus Dunkin' Brands' (Nasdaq: DNKN  ) drop in earnings over the previous year.
• The gross margin stands strong at 56.4%, versus Green Mountain Coffee Roasters' (Nasdaq: GMCR  ) 37%. The net income margin is a rule-making 11.8%, crushing Caribou Coffee's (Nasdaq: CBOU  ) 2.2%.
• The company also announced a cash dividend of $0.17 per share, a 31% increase from the previous $0.13 per share.

Finally, the company authorized the repurchase of up to an additional 20 million shares of the company's common stock. Stock buybacks create real value for investors, and are something all of us, socially responsible or not, love to see.

Still making money, and a difference, after all these years
The stock trades for $43 per share. The P/E of 27 is a little high, but you're getting a lot of company for the multiple -- a company that's still growing and, after all these years, still trying to do the right thing. Are any companies perfect in this regard? No, but to paraphrase Voltaire, it's important to never let the quest for the perfect drive out the good.

Starbucks' most recent quarterly results are proof positive there's no inherent contradiction between making money and making a difference. Read about two more Motley Fool retail favorites that are healthy, wealthy, and making a difference in their own way in this special free report: The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail. Get your copy while it's still available by clicking here.