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.
So this series aims to identify appealing FTSE 100 investment opportunities, and during recent weeks I've looked at BG Group (LSE: BG ) , Rolls-Royce Holdings (LSE: RR ) , WPP (LSE: WPP ) , Aviva (LSE: AV ) and Associated British Foods (LSE: ABF ) . This is how they scored on my total-return-potential indicators (each score in the table is out of a maximum of 5):
| Dividend cover | 5 | 5 | 4 | 4 | 5 |
| Borrowings | 4 | 5 | 3 | 4 | 4 |
| Growth | 5 | 5 | 4 | 2 | 5 |
| Price to earnings | 4 | 2 | 3 | 4 | 2 |
| Outlook | 4 | 4 | 5 | 4 | 5 |
| Total (out of 25) | 22 | 21 | 19 | 18 | 21 |
Gas and oil
On the back of 15 giant discoveries, BG shareholders have enjoyed a sparkling run in recent years. A recently released strategy update shows that the company is determined to keep up the momentum as it aims to build exploration expenditure up to $1.8 billion per annum over the next three years. If past success is anything to go by, there's every reason to be optimistic about the company's ability to build total returns for its investors from here. I'm a potential buyer.
Power systems
With an order book of about 60 billion pounds, Rolls-Royce seems set to benefit from further sales of its Trent family of engines that are selling well around the world. As well as success in the civil aviation market, the company has signed several contracts to provide and service military transport engines for the U.S. Air Force and U.S. Marine Corps, and it has started work on a new facility in Derby that will produce reactor cores for U.K. submarines. The success reflects in the valuation, and I'm watching the shares for now.
Marketing services
WPP's steadily improving performance over the past three years bodes well for forward total returns. I reckon the macroeconomic environment is likely to continue its recovery in the coming years, and that could encourage customers to increase their marketing spend. I'm likely to buy the share-price dips.
Insurance
The directors at Aviva are working to turn the company's declining business around by focusing on cash-flow growth and debt reduction. The company has also sold off operations in markets including the U.S., Russia, Malaysia, and Sri Lanka, which, although reducing net asset value, allows concentration on key markets. Very recent trading seems encouraging, and I'm optimistic about the turnaround potential, so I might buy some shares.
Food production and retailing
Sugar production and distribution earns Associated British Foods around 46% of its profit, and the company aims to be the world's leading sugar player. The Primark clothing chain brings in 32% of profits, with the rest earned on its food brands, such as Kingsmill and HP sauce. Recent double-digit growth is encouraging, and I'm watching the shares for an attractive entry point.
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