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Is CRH the Ultimate Retirement Share?

Roland Head
October 12, 2012

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 (UKX) 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 CRH  (LSE: CRH.L  ) (NYSE: CRH  ) , the Irish building materials specialist with an increasingly global footprint.

Building profits?
It goes without saying that CRH was hit hard by the property market crashes in Europe and the U.S. Despite this, it has remained profitable -- so how has it performed against the FTSE 100 over the last 10 years?

Total Return






Trailing-10-year avg.








FTSE 100







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.)

CRH's 10-year-average trailing total return is pretty dire and investors would have done well to avoid CRH shares after the property boom started to overheat. But retirement investing is all about drawing income from long-term holdings, with minimum trading. So how does CRH look as a buy, now that the boom is over?

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 CRH shapes up:



Year founded


Market cap


Net debt


Dividend Yield


5-year-average financials

Operating margin


Interest cover


EPS growth


Dividend growth


Dividend cover


Source: Morningstar, Digital Look, CRH. *CRH was formed when Cement Ltd and Roadstone merged in 1970.

Here's how I've scored CRH on each of these criteria:





Approaching middle age, but in a long-life industry.


Performance vs. FTSE

It's not been a good decade.


Financial strength

Gearing has fallen in recent years, but so have operating margins.


EPS growth

Growth remains elusive.


Dividend growth

Perhaps too generous? Dividend cover has been just 1.35 for the last two years.


Total: 15/25

A score of 15/25 is slightly below average and suggests that CRH is not a strong candidate for a retirement fund portfolio. While the shares offer an attractive yield of 4.4% at present, they look expensive based on brokers' forecasts for this year's earnings, which place the shares on a forward P/E of 17.9, according to Morningstar.

Although CRH's U.S. business has started to pick up, its emerging markets businesses are struggling to grow. The eurozone crisis is increasingly dragging down central and eastern European economies, and even CRH's Asian businesses are struggling to grow profits thanks to a combination of rising costs in India and falling volumes in China.

I think that CRH is a decent business with a long-term future -- we won't stop needing cement -- but I suspect that there may be plenty more downside to come before it recovers. This, combined with its cyclical nature, means I would not consider adding CRH to my retirement portfolio at the moment. For me, a far more appealing way to