Tag Archives: Total Returns

Business, Finance, Occupation & Industry

Is TUI Travel the Ultimate Retirement Share?

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By Roland Head, The Motley Fool

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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 TUI Travel , the travel company whose U.K.-focused brands include Thomson, Crystal Ski, and LateRooms.com.

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

Total Returns

2008

2009

2010

2011

2012

10 yr trailing avg

TUI Travel

(18.5%)

13.5%

0.8%

(28.2%)

77.3%

16.1%

FTSE 100

(28.3%)

27.3%

12.6%

(2.2%)

10%

9.3%

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.)

TUI Travel’s share price nearly doubled last year, helping it to an index-beating 10-year average total return of 16.1%. Prior to that, the firm’s performance had been rather middling, as you might expect from a European travel company during a Europe-wide recession.

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 TUI Travel shapes up:

Item

Value

Year founded

2007

Market cap (billion pounds)

3.6

Net debt (million pounds)

89

Dividend Yield

3.6%

5-year average financials

Operating margin

0.6%

Interest cover

3.9x

EPS growth

83.7%

Dividend growth

14.7%

Dividend cover

2.7 times

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

Criteria

Comment

Score

Longevity

Too early to say.

2/5

Performance vs. FTSE

Decent enough, so far.

4/5

Financial strength

Very little debt, but thin profit margins.

3/5

EPS growth

Earnings have improved post-recession.

3/5

Dividend growth

The dividend has grown steadily.

4/5

Total: 16/25

TUI Travel was formed when First Choice and TUI Tourism merged in 2007. It’s too early to say whether the company will prove to be a long-term survivor in its current form, and it’s already been the subject of failed merger talks with TUI AG, the German company that was previously the parent of TUI Tourism. So far, TUI Travel’s trading has been characterised by wafer-thin profit margins that have seen the company hover between profit and loss.

TUI‘s winter holiday business is a particular weakness, and in its most recent trading update, TUI confirmed that its winter losses had been reduced, but not eliminated, by the higher margins and improved average selling prices it had achieved this year. The company expects to deliver a full-year operating profit, …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Croda International the Ultimate Retirement Share?

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By Roland Head, The Motley Fool

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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 Croda International  , the chemical business that makes everything from industrial lubricants to skincare products.

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

Total Returns

2008

2009

2010

2011

2012

10-year trailing avg

Croda International

(7.7%)

57.9%

105.1%

14.7%

34.9%

29.5%

FTSE 100

(28.3%)

27.3%

12.6%

(2.2%)

10%

9.3%

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.

Croda’s strong growth over the last five years has seen it outperform the FTSE 100 by a factor of three. The speciality chemicals firm was promoted into the FTSE 100 in March 2012, highlighting the substantial growth opportunities that can be available among FTSE 250 companies. FTSE 100 membership means that Croda is now widely owned by pension funds and index trackers — so will it make a good retirement share?

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 Croda shapes up:

Item

Value

Year founded

1925

Market cap

£3.8bn

Net debt

£207.7m

Dividend Yield

2.2%

5-year average financials

Operating margin

18.9%

Interest cover

151x

EPS growth

34.9%

Dividend growth

30.5%

Dividend cover

2.8x

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

Criteria

Comment

Score

Longevity

Croda will be planning a centenary party soon.

4/5

Performance vs. FTSE

Very strong growth over the last decade.

5/5

Financial strength

Minimal debt and strong margins.

4/5

EPS growth

Impressive earnings growth, although it slipped last year.

4/5

Dividend growth

The dividend has grown with earnings.

5/5

Total: 22/25

Croda International has provided investors with a textbook example of successful growth over the last five years, thanks to a combination of organic growth and well-judged acquisitions. These impressive levels of growth are likely to tail off as the company gets bigger, but it remains well positioned for further expansion, thanks mainly to rising demand for its proprietary skin care products, which are widely used in cosmetics.

Croda’s consumer care division accounted for 56% of sales last year and around 73% of operating profit. The firm is accelerating its investment in Latin American markets, and CEO …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is easyJet the Ultimate Retirement Share?

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By Roland Head, The Motley Fool

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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 FTSE 100’s newest members, easyJet  , the budget airline founded by Sir Stelios Haji-Ioannou that was promoted to the FTSE 100 in its most recent reshuffle.

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

Total Returns

2008

2009

2010

2011

2012

10-year trailing avg.

easyJet

(54.3%)

26.0%

24.7%

(10.7%)

89.5%

16.3%

FTSE 100

(28.3%)

27.3%

12.6%

(2.2%)

10.0%

9.4%

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.

easyJet’s returns have tended to be more exaggerated than those of the big cap index. This is unsurprising for a smaller company that depends heavily on economic sentiment and is vulnerable to swings in fuel costs and taxation. Last year’s exceptional 89.5% total return was boosted by a 108% increase in the company’s dividend, and helped propel easyJet into the FTSE 100.

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 easyJet shapes up:

Item

Value

Year founded

1995

Market cap

£4.2bn

Net debt

£74m

Dividend Yield

2.4%

5-year average financials

Operating margin

6%

Interest cover

8.2x

EPS growth

11.7%

Dividend growth

n/a

Dividend cover

3.9x

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

Criteria

Comment

Score

Longevity

easyJet has not yet celebrated its 20th birthday.

2/5

Performance vs. FTSE

Very strong, but can it sustain its profitable growth?

4/5

Financial strength

Profitable, but cash flow is stretched.

3/5

EPS growth

Earnings have recovered well since 2009.

4/5

Dividend growth

Too early to say, after just two years of payouts.

3/5

Total: 16/25

Budget airline easyJet was pioneered the no-frills, low-cost approach to air travel and it has been hugely successful, expanding from a standing start in 1995 to a European network operating 600 routes across 30 countries today. easyJet has been profitable, too, and has managed its expansion without incurring excessive levels of debt. So what’s its secret?

To minimize its borrowing requirements and preserve its cash, easyJet has leveraged its aircraft fleet to fund future growth. A look at easyJet’s recent cash flow statements shows that it has raised £500 million …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is ITV the Ultimate Retirement Share?

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By Roland Head, The Motley Fool

Filed under:

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

Business, Finance, Occupation & Industry

Is International Consolidated Airlines the Ultimate Retirement Share?

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By Roland Head, The Motley Fool

Filed under:

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 International Consolidated Airlines Group , the strangely named company that operates British Airways and Spain‘s troubled Iberia airline. IAG released its final results this week, showing that British Airways‘ profits were cancelled out by Iberia’s losses. So can IAG‘s management turn Iberia around to deliver sustainable, long-term growth?

International Consolidated Airlines vs. FTSE 100
Let’s start with a look at how IAG has performed against the FTSE 100 since it was formed in Jan. 2011 through the merger of British Airways, Iberia, and, more recently, bmi:

Total Returns

2011

2012

2013 YTD

3-Yr. Trailing Avg.

International Consolidated Airlines

-45.9%

25.4%

29.4%

4.2%

FTSE 100

-2.2%

10%

8.4%

9.7%

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.)

IAG‘s stock market performance since its creation has been fairly unimpressive, and yesterday the group reported a pre-tax loss of 997 million euros for 2012. Another loss seems likely in 2013, as the group faces the exceptional costs and likely disruption from strike action involved in restructuring loss-making Iberia. Despite this, IAG‘s shares have performed strongly so far this year, as analysts have upgraded their expectations for IAG, thanks to the success it has had in integrating bmi into a restructured and profitable British Airways.

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 IAG shapes up:

Item

Value

Year founded

2011

Market cap

4.4 billion pounds

Net debt

1.9 billion euros

Dividend Yield

0%

3-Year Average Financials

Operating margin

2.5%

Interest cover

2.0x

EPS growth

-132%

Dividend growth

n/a

Dividend cover

n/a

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

Criteria

Comment

Score

Longevity

A difficult marriage that may yet fail.

1/5

Performance vs. FTSE

Below average, but too early to really judge.

2/5

Financial strength

Despite this year’s losses, it’s fairly robust.

3/5

EPS growth

Not much growth yet.

1/5

Dividend growth

Doesn’t yet pay a dividend.

0/5

Total: 7/25

IAG currently has the dubious distinction of being one of just three companies in the FTSE 100 that don’t pay a dividend — the others being Royal Bank of Scotland and Lloyds. That’s not a great start for …read more
Source: FULL ARTICLE at DailyFinance