LONDON — To me, capital growth and dividend income are equally important. Together, they provide the total return from any share investment and, as you might expect, my aim is to invest in companies that can beat the total return delivered by the wider market.
To put that aim into perspective, the FTSE 100 has provided investors with a total return of around 3% per annum since January 2008.
Quality and value
If my investments are to outperform, I need to back companies that score well on several quality indicators, and buy at prices that offer decent value.
This series aims to identify appealing FTSE 100 investment opportunities and, during recent weeks, I’ve looked at Unilever N.V. (ADR) (NYSE:UN), Admiral Group PLC (LSE:ADM), Croda International PLC (LSE:CRDA), Burberry Group PLC (LSE:BRBY) and Bunzl PLC (LSE:BNZL). This is how they scored on my total-return-potential indicators (each score in the table is out of a maximum of five):
|Price to earnings||2||3||2||3||2|
|Total (out of 25)||19||21||18||22||17|
There’s a strong showing on the scoring from both Burberry and Admiral, but all five companies have their attractions.
Unilever N.V. (ADR) (NYSE:UN) continues to power forward in its quest to become what the directors call “a sustainable growth company.” You really can’t argue with the figures. The recent full-year statement fizzed with desirable numbers, as the firm’s stalwart brands, like Lipton, Wall’s, Knorr, Hellman’s, Omo, and Ben & Jerry’s continued to hit the spot with the masses. Unilever N.V. (ADR) (NYSE:UN)‘s revenues aren’t just big in Britain, though. Last year, the firm sold around €51 billion of products to more than 190 countries, with about 55% coming from fast-growing emerging markets. I’m looking to buy on the dips.
The board at Admiral Group PLC (LSE:ADM) has its sights set on expansion abroad. The fast-growing car insurer derived 87% of turnover by insuring U.K. cars last year, but the loss-making international car division turned over just 7%. A further 6% came from other businesses, mainly the firm’s well-known comparison website, Confused.com, but also including a fledgling U.K. household insurance division launched in December. There’s much to do if the boards’ goal is to be realized, but past performance suggests that Admiral Group PLC (LSE:ADM) could do well with its expansion plans, despite the inherent cyclical nature of insurance-company profits generally. I’m watching with interest.