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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 all of the companies I've covered so far on this page).

Over the last week or so, I've looked at Tesco (LSE: TSCO.L  ) , Vodafone (LSE: VOD.L  ) , British American Tobacco (LSE: BATS.L  ) , Unilever (LSE: ULVR.L  ) and BP (LSE: BP.L  ) . Let's take a look at how each of them scored against my five key retirement share criteria:













Performance vs. FTSE






Financial strength






EPS growth






Dividend growth












Every little bit helps

Tesco and BAT take joint first place in this quintet, with both matching the series' best score to date of 21/25. For me, the key attractions of both companies are their large scale and pricing power; neither is particularly cyclical and both have huge market shares. As a result, both pay above-average dividends and have excellent records of dividend growth. BAT is tremendously profitable and while Tesco's profits are under pressure at present, I believe it will recover from its current slump in form.

Unilever is a global consumer goods giant whose products -- which include brands like Cif, Domestos and Bertolli -- we all use. Its focus on and experience in emerging markets has helped it outperform the FTSE 100 in recent years and deliver strong growth. Unilever's size and diversity should help mitigate any regional or product-specific problems it faces in the future and I believe that over time it will offer good yield on cost growth.

Mobile telecoms giant Vodafone is a high-yield favorite with Fools and also offers the potential for steady long-term growth, having managed to transform itself from a hot growth stock to an established blue chip within a decade. Dot-com boom era investors may still be nursing a loss, but for the rest of us it's doing very nicely and looks set to continue to do so.

Bringing up the rear in this selection is the FTSE 100's fourth-largest company, BP. BP is in transition at the moment and its relatively low score of 16/25 reflects this -- yet I feel confident that in the long term, it will become an excellent retirement share once more. Indeed, if you intend to hold forever and are willing to accept a slightly higher risk, BP may offer the potential for greater capital gains and dividend growth than its peer Royal Dutch Shell.

Expert selections

Although doing your own research is important, one way of identifying great dividend-paying shares is to study the choices of successful professional investors. One of the most successful income investors currently working in the City is fund manager Neil Woodford, who manages 20 billion pounds of private investors' money, more than any other City manager. Neil Woodford's dividend stock picks have outperformed the wider index by a staggering 305% over the last 15 years.

You can learn about Neil Woodford's top holdings and how he generates such fantastic profits in this free Motley Fool report. Many of Woodford's choices look like excellent retirement shares to me and the report explains how he chose some of his biggest holdings.

This report is completely free and I strongly recommend you download"8 Shares Held By Britain's Super Investor" today, as it's available for a limited time only.

Warren Buffett buys British! The legendary investor has recently topped up on his favorite U.K. blue chip. Discover what he bought -- and the price he paid -- within our latest free report!

Further investment opportunities

Roland owns shares in Tesco, Vodafone and Unilever but does not own any of the other shares mentioned in this article. The Motley Fool owns shares in Tesco and has recommended Unilever. The Motley Fool has a disclosure policy.
We Fools may not all hold the same opinions, but we all believe that
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