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 (UKX) 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 Aviva (ISE: AV.L) , British Land (ISE: BLND.L) , Marks & Spencer Group (ISE: MKS.L) , AstraZeneca (ISE: AZN.L) , and BHP Billiton (ISE: BLT.L) . 

Let's take a look at how each of them scored against my five key retirement share criteria:

Criteria

Aviva

Marks & Spencer

British Land

BHP Billiton

AstraZeneca

Longevity

3/5

5/5

5/5

3/5

3/5

Performance vs. FTSE

1/5

3/5

3/5

5/5

4/5

Financial strength

3/5

3/5

4/5

3/5

4/5

EPS growth

1/5

2/5

2/5

3/5

3/5

Dividend growth

3/5

4/5

4/5

4/5

5/5

Total

11/25

17/25

18/25

18/25

19/25

High yield selection
Aviva's 7.9% yield makes it a firm favorite with income investors, who believe that the company will pull through its rough patch. I believe that Aviva's car-crash score of 11/25 understates the company's true potential as a retirement share. So far, I've been impressed with interim CEO John McFarlane's efforts at restructuring and refocusing the company, and the markets have liked it, too; Aviva's share price has risen 21% over the last three months, more than twice the 9% gain seen by the FTSE 100. Despite this, there are risks -- especially if the eurozone crisis gets worse and any of the PIIGS countries are forced to exit the single currency.

Another stock offering an outstandingly high yield is AstraZeneca, whose shares currently yield 6%. The U.K.'s second-largest pharmaceutical company has not dodged the patent cliff as successfully as peer GlaxoSmithKline, and markets have punished it accordingly. This week's news that the company has appointed a new CEO, Pascal Soriot, may mark a turning point. Soriot was previously chief operating officer of Swiss pharma giant Roche and has a lot of top-level experience in the industry.

Three solid alternatives
Climbing down the yield ladder to a still attractive 4.9%, I found British Land, which scored 18/25 in my review. British Land is one of the largest and oldest property companies in the U.K. and has a particular focus on prime London properties, providing it with a certain resilience to the economic woes affecting the rest of the United Kingdom. I was pleasantly surprised by British Land and have added it to my personal watchlist; its shares are currently trading at 2003 levels, having shed all of the gains made in the property boom. This should make its current valuation fairly stable.

These five stocks were an unusually generous group in terms of dividends; the final two, Marks & Spencer and BHP Billiton, both offer attractive yields when compared to their peer groups. M&S comes out first with a 4.7% yield that is covered more than twice, despite the languishing state of the company's clothing sales. New management has been brought in to turn the clothing division around and recent bid speculation has also acted to firm up the share price, which is up 7.5% this month.

BHP Billiton's woes are caused by flagging growth in China and elsewhere, and are the main reason that its share price is 1.4% lower than it was a year ago -- a period during which the FTSE 100 has risen by 17%. BHP recently announced that it was canceling its planned $20 billion Olympic Dam project in Australia and would be reviewing certain other capital expenditure commitments -- suggesting that it believes there may be further clouds on the horizon. However, BHP's flagging share price has helped boost its yield to 3.7%, an attractive level for a miner -- so if you believe an upturn may come sooner rather than later, now could be a good time to add BHP's shares to your retirement portfolio.

An expert tip
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 outperformed the wider index by a staggering 305% over the 15 years to Dec. 31, 2011.

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 is 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:

The article Are These the Ultimate Retirement Shares? originally appeared on Fool.com.

Roland owns shares in Aviva but does not own any other shares mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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