Top-Rated Stocks That Treat Shareholders Right

The flip side to shareholder-friendly stocks expected to underperform the market? Highfliers that pay little heed to their owners' interests. Conversely, there are 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. Moreover, each company is scored relative to its market index and its industry group. It 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 that also sport above-average CGQ scores, either in their index group or among industry peers.

Sources: 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 success in investing, there are many factors an investor should consider, and 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
According to the nation's largest e-prescription network, Surescripts-RxHub, there were 240 million e-prescriptions filed in 2008, double the amount in 2007. And in just the first quarter of 2009 alone, there were about 134 million e-prescription messages exchanged among e-prescribers, pharmacies, and payers.

With health-care reform at the top of Congress's agenda, now might be the best time for Zix to sell off its e-prescription business. The encryption services specialist hasn't been able to make much of a go of its e-prescription services -- sales have steadily declined over the past year to just $4.5 million, or 16% of trailing revenue, down from 25% last year. But the reforms being bandied about, along with the changes made to HIPAA as part of President Obama's stimulus package in February, could allow the unit to become a key component of someone else's offerings.

Like a doctor's handwriting, HIPAA requires that patient history data be rendered unintelligible while it is being transmitted, and the new reforms call for stricter enforcement, with enhanced penalties of as much as $1.5 million for violations. Encrypting the data as Zix's e-prescription service does would help companies comply. While Allscripts-Misys (NASDAQ:MDRX) would seem a natural buyer here, Misys was criticized for its Allscripts purchase last year because of the debt it took on to buy the company, and it was only just able to refinance that debt. It might be reluctant to go to the well again.

Surescripts itself might also be logical. It recently merged with RxHub -- a service formed by CVS Caremark (NYSE:CVS), Express Scripts, and Medco Health Services -- and says that Medicare reforms are driving more physicians to use e-prescription services. With a portion of $20 billion in stimulus spending targeted toward e-medical record systems, Zix may find its encryption services attractive in the market.

Top-rated CAPS All-Star member TXBuilder thinks Zix's pursuit of "strategic alternatives" is an opportunity to unlock shareholder value: "I think there is a deal in horizon for this company, and the stock is good for at least 200 to 300 percent profit within 8 to 10 month. I am adding this to my personal portfolio."

A Foolish quotient
Many factors go into whether a stock is a buy or a sell, but 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.