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Business, Finance, Occupation & Industry

Is Melrose Industries 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 Melrose Industries  , an unusual company which specialises in turning around manufacturing businesses, before selling them on. Melrose’s current portfolio of businesses contains German utility meter maker Elster, Brush Turbo Generators and Marelli Motori, which make electric motors and generators, and Bridon, which makes rope and wire products used in the oil and gas industry.

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

Total Returns 2008 2009 2010 2011 2012 2013 YTD 5 yr trailing avg
Melrose Industries -40.7% 115.7% 77.7% -10.7% -31% 18.8% 10.2%
FTSE 100 -28.3% 27.3% 12.6% -2.2% 10% 9.9% 5.3%

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.)

In 10 years, Melrose has grown from a 13 million-pound AIM company to a 3.3 billion-pound FTSE 100 member. It moved onto the main market in 2005, and its five-year average trailing total return of 10.2% is almost twice the FTSE 100’s 5.3% figure. Clearly, the company’s management has been skilled at creating shareholder value, but will Melrose have the longevity required for a 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 Melrose shapes up:

Item Value
Year founded 2003
Market cap 3.3 billion pounds
Net debt 997.7 million pounds
Dividend Yield 3.1%
5-Year Average Financials
Operating margin 9.1%
Interest cover 4.9x
EPS growth -6.8%
Dividend growth 9.2%
Dividend cover 1.7x

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

Criteria Comment Score
Longevity It’s still early days. Will it work over the long term? 2/5
Performance vs. FTSE Very strong, but its track record is short. 4/5
Financial strength No obvious problems. 4/5
EPS growth Earnings tend to fluctuate due to the nature of the business. 3/5
Dividend growth 57% dividend growth since 2008. 4/5
Total: 17/25

Melrose is essentially a publicly traded investment company, which plays an active role in turning around its acquisitions before targeting a sale within a typical timeframe of three to five years. The firm’s

From: http://www.dailyfinance.com/2013/04/11/is-melrose-industries-the-ultimate-retirement-shar/

Business, Finance, Occupation & Industry

Is London Stock Exchange 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 to protect 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 newly promoted FTSE 100 member London Stock Exchange Group  , the company that operates the Main Market and the Alternative Investment Market (AIM) in London, as well as the Mercato Telematico Azionario (MTA) — the main Italian stock market.

LSE Group vs. FTSE 100
Let’s start with a look at how the London Stock Exchange Group has performed as a company against the FTSE 100 over the last 10 years:

Total Returns 2008 2009 2010 2011 2012 10-Yr. Trailing Average
LSE Group -73% 45.6% 20.2% -1.9% 40.5% 17.3%
FTSE 100 -28.3% 27.3% 12.6% -2.2% 10% 9.2%

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.)

Unsurprisingly, London Stock Exchange Group fared very badly in 2008, during the onset of the financial crisis. However, it has recovered strongly since and has outperformed the FTSE 100 by an average of 8.1% per year since 2003.

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 London Stock Exchange shapes up:

Item Value
Year founded 2007*
Market cap 3.6 billion pounds
Net debt 481.7 million pounds
Dividend Yield 2.2%
5-Year Average Financials
Operating margin 35.7%
Interest cover 7.4x
EPS growth 31%
Dividend growth 9.5%
Dividend cover 1.7x

* London Stock Exchange Group was formed in 2007 through a merger of the Borsa Italiana and London Stock Exchange.

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

Criteria Comment Score
Longevity The LSE and Borsa Italiana have 200-year-plus histories. 4/5
Performance vs. FTSE Very strong. 4/5
Financial strength Low debt, high margins, and good cash flow. 4/5
EPS growth The last couple of years have seen a strong recovery. 4/5
Dividend growth The payout is up 40% on five years ago. 4/5
Total: 20/25

In many ways, the London Stock Exchange Group is a data and software company. Financial markets are heavily computerized, and investors depend on software systems for both financial data and executing transactions. In the first half of last year, 42% of LSE Group’s revenue came from its Information Services division, which …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Hammerson 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 to protect 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 property firm Hammerson , which owns a 5.5 billion-pound portfolio of shopping centres and retail parks in France and the U.K..

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

Total Returns 2008 2009 2010 2011 2012 10-Yr. Trailing Average
Hammerson -43.8% -15.2% 1.9% -10.6% 39.4% 5.6%
FTSE 100 -28.3% 27.3% 12.6% -2.2% 10% 9.2%

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.)

Hammerson’s 10-year average trailing total return trails behind that of the FTSE 100, suggesting it has underperformed the index — but with a real estate investment trust (REIT) such as this, the main attraction is income. I’ll take a look at Hammerson’s income credentials later in this article.

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 Hammerson shapes up:

Item Value
Year founded 1942
Market cap 3.5 billion pounds
Net debt 2.0 billion pounds
Dividend Yield 3.7%
5-Year Average Financials
Operating margin -26.1%
Interest cover 1.7x
EPS growth -11.9%
Dividend growth -0.9%
Dividend cover 1.1x

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

Criteria Comment Score
Longevity 71 years isn’t bad. 4/5
Performance vs. FTSE Slightly below average. 2/5
Financial strength Gearing has dropped steadily since 2008 and returns have improved. 4/5
EPS growth Inconsistent. 3/5
Dividend growth A strong record was ruined when the markets crashed in 2008. 3/5
Total: 16/25

In the U.K., REITs such as Hammerson are exempt from corporation tax on their profits and from capital gains on the sale of their rental properties. In return for this benefit, they are required to distribute 90% of their taxable income to shareholders as dividends. All of this means that the share price of a REIT is usually influenced by the book value per share of the firm’s property and by its dividend yield, which is linked to its rental income.

Hammerson currently trades at around 89% of its book value, compared to 95% for its retail REIT peer Intu Properties (Intu was formerly …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is The Sage Group 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 UK 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 UK 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 accounting and business software specialists The Sage Group .

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

Total Returns 2008 2009 2010 2011 2012 10 yr trailing avg
The Sage Group -22.5% 33.7% 27.7% 10.5% 3.6% 11.5%
FTSE 100 -28.3% 27.3% 12.6% -2.2% 10% 10%

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.)

Sage’s 10-year average trailing total return shows that it has managed to edge ahead of the FTSE 100 over the last ten years, but has it got the makings of a great 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 Sage shapes up:

Item Value
Year founded 1981
Market cap £4.1bn
Net debt £147.6m
Dividend Yield 3%
5-Year Average Financials
Operating margin 23.1%
Interest cover 22.1x
EPS growth 9.5%
Dividend growth 7.7%
Dividend cover 2.0x

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

Criteria Comment Score
Longevity 32 years isn’t all that long. 3/5
Performance vs. FTSE A strong record. 4/5
Financial strength Low gearing, strong cash generation, high margins. 5/5
EPS growth Attractive, steady growth. 4/5
Dividend growth Steady growth amply covered by free cash flow. 5/5
Total: 21/25

Sage’s score of 21/25 highlights the company’s attractions as a retirement share. It has a history of steady dividend increases and for the last six years at least, the firm’s dividends have been covered by free cash flow two or more times, making them very safe and affordable. Sage’s profit margins are high and while its relative youth might be a concern for a retirement portfolio, I think that the way Sage software has become an integral part of business computing — rather like Microsoft Windows — discounts this risk to some extent.

Sage has been in the FTSE 100 since 1999 and has gradually expanded the scope of its software beyond its initial accounting remit. Areas covered today include payroll, customer relationship management and a wide range of financial planning, forecasting and …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is IMI 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 engineering group IMI , one of the smaller companies in the FTSE 100.

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

Total Returns 2008 2009 2010 2011 2012 10-Yr. Trailing Avg.
IMI -25.7% 98.4% 86.5% -16.6% 48.4% 20.2%
FTSE 100 -28.3% 27.3% 12.6% -2.2% 10% 10%

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.)

IMI‘s meteoric growth over the last decade earned it promotion into the FTSE 100 in 2010 and means that shareholders have enjoyed an average annual return of twice the FTSE 100 average over the last 10 years — not bad for a company that specializes in “the precise control and movement of fluids”! So does IMI have the makings of a great 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 IMI shapes up:

Item Value
Year founded 1862*
Market cap 4.3 billion pounds
Net debt 117 million pounds
Dividend Yield 2.4%
5-Year Average Financials
Operating margin 13.5%
Interest cover 14.0x
EPS growth 15.6%
Dividend growth 10%
Dividend cover 2.1x

*The company that became IMI was founded in 1862, but from 1927-1966, it was part of ICI, which it helped found.

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

Criteria Comment Score
Longevity A long and respectable heritage. 5/5
Performance vs. FTSE Outstanding. 5/5
Financial strength Low debt, strong cash generation, but a big pension deficit. 3/5
EPS growth Strong earnings growth is expected to continue. 4/5
Dividend growth Decent growth with no cuts in more than 20 years. 4/5
Total: 21/25

Unlike many British engineering businesses, IMI has survived and prospered for more than 150 years. Although the nature of its business has changed several times over the years — until the 1990s, its main area of expertise was metals — this isn’t unusual for successful engineering businesses, which tend to be driven by a combination of scientific discovery and economic necessity.

Although analysts’ forecasts suggest IMI‘s earnings growth will …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Whitbread the Ultimate Retirement Share?

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By Roland Head, The Motley Fool

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LONDON — The past five years have been tough for those in retirement. Portfolio valuations have been hammered and annuity rates have plunged. There’s no sign that things will improve 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 Whitbread , the company that runs U.K. hotel and restaurant chains including Costa Coffee, Premier Inn, and Brewers Fayre.

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

Total Returns 2008 2009 2010 2011 2012 10-Year Trailing Average
Whitbread (31.9%) 57.9% 29.7% (9.8%) 59.9% 24.2%
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.

Whitbread’s 10-year average trailing total return is 2.4 times that of the FTSE 100, highlighting the strong shareholder returns this company has delivered over the past decade.

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 Whitbread shapes up:

Item Value
Year founded 1720
Market cap 4.7 billion pounds
Net debt 525.8 million pounds
Dividend Yield 2.1%
5-Year Average Financials
Operating margin 17.5%
Interest cover 9.2x
EPS growth 11.1%
Dividend growth 11.1%
Dividend cover 2.8x

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

Criteria Comment Score
Longevity One of the U.K.’s oldest companies. 5/5
Performance vs. FTSE Very strong. 5/5
Financial strength Decent margins moderate debt, although cash flow is tight. 4/5
EPS growth Steady and attractive. 4/5
Dividend growth Growth in line with earnings. 4/5
Total: 22/25

With nearly 300 years of operating history, Whitbread has an ability to evolve and adapt that isn’t really in question, although it’s worth noting that until 2001 it was primarily a brewer and pub operator. The company’s management believes that hotels and restaurants offer superior growth prospects to pubs and beer, and the fact that Whitbread has delivered a 24.2% average annual return over the past 10 years suggests that they may be correct.

In Whitbread’s latest trading statement, it reported another quarter of strong growth, especially for the Costa Coffee and Premier Inn businesses, both of which are expanding aggressively. Globally, Whitbread is on course to open 320 new Costa stores and 1,300 Costa Express units in the 2012/13 financial year, …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

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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 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