Socially-Responsible Favorites

09/02/2015 10:00 am EST


Charles Carlson

Editor, DRIP Investor

Dividend expert Chuck Carlson looks at the fast growing market for socially-responsible investing; here, the editor of DRIP Investor highlights two stocks that offer dividend reinvestment plans, show fundamental and technical strength, and rank highly among social-responsibility screens.

Steven Halpern:  Our guest today is Chuck Carlson, the industry-leading expert on dividend reinvestment plans and editor of DRIP Investor.  How are you doing today, Chuck?

Chuck Carlson:  I'm fine, Steve, thank you.

Steven Halpern:  First off, for those not familiar with DRIPs—or dividend reinvestment plans—could you briefly explain what these programs are and how they could be used for a long-term investment strategy?

Chuck Carlson:  Sure, DRIPs—or dividend reinvestment plans—are programs offered by about 900 publicly traded companies that allow investors to buy stock directly from the companies.  

You can buy stock in two ways:  First, by reinvesting your dividends, hence, the term dividend reinvestment, where instead of getting a dividend check, you direct the company to put those funds back into buying additional shares, both full and fractional shares.

And, in addition to that, you can make what are called optional cash purchases where you can send additional amounts of money—in many cases, the minimums are just $25 to $50—at your option, send that money to the company and they can go out again and buy full and fractional shares.

So it's a very good way for people both to get started in investing because it doesn't require a lot of money as well as to continue a long-term buy and hold and buy more strategy for companies and do it in a very cost effective way.

Steven Halpern:  Now, in your latest issue, you focus on a very specific investment area known as socially responsible investing or SRI.  Could you explain the background of SRI?

Chuck Carlson:  Sure, SRI—or socially responsible investing—is one of the fastest growing areas in the investment world where people are investing in companies that, in effect, abide by principles that the individuals believe in.

Whether that's sustainability, fossil fuel free investing, or the traditional environmental, social, and governance, so your investors are looking at these kind of qualitative factors.

How do companies treat their shareholders? How do they treat their employees? How do they treat the environment, etc.? You're seeing more and more people, in fact, it's estimated, Steve, that about one out of every six dollars professionally managed—that's nearly $7 trillion—is invested in one sort or another in the SRI space.

So, again, this is an outgrowth of more and more people kind of investing not just with their heads, but with their hearts as well.

Steven Halpern:  Now, when you look at socially responsible stocks, you focused on those that specifically offer DRIPs and then you ranked them based on your proprietary Quadrix rating system, which looks at stocks on a wide variety of metrics.  Could you tell our listeners a little about Quadrix and how you applied this to the universe of socially responsible stocks?


Chuck Carlson:  Sure, Quadrix, as you mentioned, is our company's stock rating system that we developed and have been using in real time with real dollars for more than 14 years.

In essence, Quadrix is our fishing pond and our fishing pole in the sense that we score more than 5000 stocks, each of those stocks on more than 90 different variables.  

Variables are grouped along six major categories.  We're looking at value, operating momentum, earnings estimates, quality, financial strength, and relative price performance, so we're looking at a bunch of the fundamental as well as technical variables that we're weighting and scoring.  

Those scores funnel up to give a stock's value score—momentum score within those categories—and then those six categories funnel up to give an overall Quadrix score, which is a score from zero to 100—with 100 being the highest score—so we have a very disciplined, very consistent way to rank a large universe of stocks including those stocks that abide by SRI principles.

Steven Halpern:  Okay, so let's try to pull this all together.  You took socially responsible stocks that offer DRIPs, and that rank high on your Quadrix system, and you come up with a couple of favorites.  Maybe you could walk us through a few names.

Chuck Carlson:  Sure, two names that I like quite a bit:  One is Jones Lang Lasalle (JLL), is a real estate services company.  Now, I want to make a distinction.  It is not a real estate investment trust or an REIT.  

Jones Lang Lasalle basically provides a variety of real estate services, so they do property management.  They do property development.  They do mortgage financing.  

Also, they are an asset manager for people investing in real estate, so they have a variety of ways that they participate in the commercial real estate market both in the US, as well as globally, and their returns have been quite strong.  

Their growth trajectory has been quite strong and it's also a company that both scores very well in our Quadrix stock rating system, as well as scores very well on SRI screens.

Steven Halpern:  Now, you also point to a company called Skyworks Solutions (SWKS).  Could you share your thoughts there?

Chuck Carlson:  Skyworks is a company that is becoming a major player in this idea of the Internet of Things, Steve, which merely implies that we are increasingly becoming a connected world, not just through computers but wearables, autos, appliances.  

Everything is basically interconnectivity via the Internet and Skyworks is a major provider of chips for that world.  

They're also a major provider of chips for Apple (AAPL), and other cell phone companies, so the firm has really been showing extraordinary earnings growth as well as revenue growth.  

It's a stock we like quite a bit. It has pulled back here in recent trading and I think it's offering a pretty good opportunity, especially for investors looking to combine good investment stocks with SRI stocks.

Steven Halpern:  Again, our guest is Chuck Carlson of DRIP Investor.  Thank you so much for your time, today.

Chuck Carlson:  Thank you, Steve.

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