LONDON — The last five years have been tough for those in retirement. Portfolio valuations have been hammered and annuity rates have plunged. There’s no sign of things improving anytime soon, either, as the eurozone and the U.K. economy look set to muddle through at best for some years to come.

A great way of protecting yourself from the downturn, however, is by building your retirement fund with shares of large, well-run companies that should grow their earnings steadily over the coming decades. Over time, such investments ought to result in rising dividends and inflation-beating capital growth.

In this series, I’m tracking down the U.K. large-caps that have the potential to beat the FTSE 100 over the long term and support a lower-risk income-generating retirement fund (you can see the companies I’ve covered so far on this page).

Today, I’m going to take a look at one of the U.K.’s biggest television broadcasters, ITV  . After a very successful run recently, does it have the making of a retirement share?

ITV vs. FTSE 100
Let’s start with a look at how ITV has performed against the FTSE 100 over the last 10 years:

Total Returns	2008	2009	2010	2011	2012	10-Year Trailing Avg.
ITV	(50.6%)	31.7%	33.8%	(2.1%)	57.3%	10.7%
FTSE 100	(28.3%)	27.3%	12.6%	(2.2%)	10%	10.2%

Source: Morningstar. Total return includes both changes to the share price and reinvested dividends. These two ingredients combined are what make it possible for equity portfolios to regularly outperform cash and bonds over the long term.

ITV‘s average annual total return over the last 10 years has been almost identical to that of the FTSE 100, despite its recent outperformance, which has been the result of its post-2008 turnaround plan.

What’s the score?
To help me pinpoint suitable investments, I like to score companies on key financial metrics that highlight the characteristics I look for in a retirement share. Let’s see how ITV shapes up:

Year Founded	2004
Market Cap	5 billion pounds
Net Debt (cash)	(206 million pounds)
Dividend Yield	2%

Five-year average financials

Operating Margin	(12%)*
Interest Cover	2.8 times
EPS Growth	14.3%
Dividend Growth	(3.8%)*
Dividend Cover	2.8 times

*Caused by a 2.7 billion pound goodwill impairment in 2008, when the dividend was also canceled for a year.

Here’s how I’ve scored ITV on each of these criteria:

Criteria	Comment	Score
Longevity	ITV was only formed in 2004, but its parts are much older.	3/5
Performance vs. FTSE	Evenly matched.	3/5
Financial strength	Rising profit margins and net cash.	4/5
EPS growth	Decent growth.	4/5
Dividend growth	Rising payout but checkered history and low yield.	3/5
Total: 17/25

ITV‘s score of 17/25 shows that a few years of strong performance isn’t enough to score highly as a retirement share — companies with high scores have generally delivered many years of above-average performance, and often have much longer pedigrees than ITV.

To be fair, ITV is the result of a 2004 merger between regional broadcasters Carlton and Granada, both of which had been in business since the 1930s. ITV is also much leaner and more profitable than it was before 2008. Its recent full-year results showed that operating profits rose by 20% to 453 million pounds during 2012, thanks in part to a …read more
Source: FULL ARTICLE at DailyFinance