Top-Rated Stocks That Treat Shareholders Right

There are plenty of shareholder-friendly stocks with lackluster performance, and plenty of highfliers that pay little heed to their owners' interests. Somewhere in the middle, however, you'll find top-flight companies that also treat their shareholders with respect.

Institutional Shareholder Services -- the big name in corporate proxies -- measures how well a company performs in as many as 63 categories covering four broad areas. Each company is scored relative to its market index and its industry group. From those calculations, ISS assigns the stocks a rating that it calls its corporate governance quotient, or CGQ.

Some evidence supports the notion that companies with weaker governance have higher risk, decreased profitability, and lower valuations. We'll be looking at stocks that Motley Fool CAPS investors have marked to outperform the market, and which also sport above-average CGQ scores, either in their index group or among industry peers.

Source: Yahoo! Finance, Motley Fool CAPS.
*Relative placement when compared with companies in index or industry. Higher is better.

Although finding good companies and holding them for the long term is one of the greatest secrets to successful investing, there are many factors an investor should consider in assessing stocks. How well a company treats shareholders shouldn't be least among them. View these rankings as a way to gauge how these businesses stack up against one another relative to their shareholder policies.

Go to the head of the class
With the economy going anywhere but full steam ahead, there's been a general lack of demand for steel products. The vicious vortex sucking in other industries has implications for coal companies as well -- along with their future profits.

Major coal producers have begun to sound like a broken record, endlessly reporting that metallurgical coal demand is exceedingly weak. Arch Coal (NASDAQ:ACI), for example, is cutting back production, and both Arch and Headwaters report that they're shifting some metallurgical coal production to steam coal. That can't be good news for Peabody Energy (NYSE:BTU), since it's already suffering from falling prices. The price for a ton of coal plummeted in the first quarter, from $61.50 at the start of the year to $45.63 last month. Peabody had to announce that despite a threefold jump in profits on a 15% increase in revenue, it will need to "right-size inventory" to account for the declines.

At this point, only an upturn in the economy will get demand growing again. I have my doubts about President Obama's proposed remedies, but if they do gain traction, some industries stand to benefit more than others, and businesses like Headwaters may prosper. 

CAPS member wb2edo thinks growth in infrastructure projects should boost demand for Headwaters' operations:

The price of oil will begin to rise in the next year or so as economic activity picks up worldwide. With this economic expansion will come infrastructure projects. HW is represented in the energy area with its synthetic fuel business (breakeven at $35 per barrel oil price); its combustion technology and clean coal technology; and in the construction business with its flyash cement products and decorative stone business. There is no way they cannot make money.

A Foolish quotient
Many factors go into whether a stock is a buy or a sell; do corporate governance policies enter into your equation? It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page.