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 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 to protect yourself from the downturn, however, is to build 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 (INDEX: ^FTSE) 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 Reckitt Benckiser (LSE: RB.L), the consumer goods giant that owns brands such as Durex, Calgon, Finish, Nurofen, and Cillit Bang.

Cleaning up
Reckitt Benckiser has performed strongly against the FTSE 100 over the last 10 years, as these figures show. Its defensive bias -- people don't stop cleaning their kitchens or getting headaches during recessions -- has helped it deliver consistently good performance:







Trailing 10-Year Average

Reckitt Benckiser Total Return







FTSE 100 Total Return







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.

Reckitt's trailing 10-year average total return is highly impressive and is slightly better than that of Unilever, one of its biggest direct competitors, suggesting that it could make a strong contribution to a retirement portfolio.

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 Reckitt shapes up:

The basics

Year Founded


Market Cap

26 billion pounds

Net Debt

1.9 billion pounds

Dividend Yield


*Benckiser and Reckitt were founded in 1823 and 1840, respectively. They merged to become Reckitt Benckiser in 1999.

Five-year average financials

Operating Margin


Interest Cover

98 times

EPS Growth


Dividend Growth


Dividend Cover

2.2 times

Source: Morningstar; Digital Look; Reckitt Benckiser.

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



Score (out of 5)


You have to give RB credit for its long-lived ancestors.


Performance vs. FTSE

Very good.


Financial Strength

Low debt, high interest cover, and high margins.


EPS Growth

Earnings rise steadily ahead of inflation.


Dividend Growth

Above-average growth bodes well for long-term holders.




Total: 21/25

A score of 21 out of 25 is excellent and reflects Reckitt Benckiser's high-quality management, brands, and products. As a company, it is making a shift toward earning more from health and hygiene products, which offer higher margins than some of its other consumer goods. This should help it to continue to grow earnings, although it could broaden the range of competition it faces to include companies such as GlaxoSmithKline.

One of the challenges facing Reckitt is expanding its market share in emerging markets, where it has not been as successful as its peer Unilever. It needs to succeed in these key markets to counteract stagnant sales in Western Europe and North America. Reckitt's new CEO, Rakesh Kapoor, is refocusing the company on growth markets like Brazil and India, and the success -- or lack thereof -- of this strategy is likely to play a decisive role in earnings growth in coming years.

Expert selections
Doing your own research is important, but another good way to identify 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 more money for private investors than any other City manager. Neil Woodford's dividend stock picks outperformed the wider index by a staggering 305% in the 15 years to the end of 2011.

You can learn about Neil Woodford's top holdings and how he generates such fantastic profits in this free Motley Fool report. I strongly recommend you download "8 Shares Held By Britain's Super Investor" today, as it is available for a limited time only.

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