Nine big reliable shares

Several peripheral European countries look like they could hit the financial buffers, and fiscal constraints are becoming ever more pressing in the UK and US, too. Nothing new there, then. But political turmoil in North Africa and the Middle East, plus the Japanese earthquake, and now the arrest of the head of the International Monetary Fund, are genuine 'black swan' events that few could have predicted.

With all this uncertainty in mind, we've decided to screen for the market's most dependable larger companies. While the table ranks our nine stocks in order of highest yield first, our focus has not been to seek out value, but rather to find those stocks within the FTSE 350 that have delivered most consistently over the last five years. It's notable that the quality of these businesses has by and large been recognised in the form of fairly high valuation. High prices have tempered our enthusiasm for some of these stocks when writing about them recently, which is why the most recent IC View is included in our table. But some may conclude that, in the words of Warren Buffett, it's better to buy a great company at a fair price than a fair company for a great price.

Our recent took a similar approach with more of a value bias. The results from that screen have so far been impressive with an average share price rise from the 13-stock selection of 4.4 per cent. The FTSE All Share has returned 0.4 per cent over the same period.

This time, the criteria we've set are:

■ A return on equity of over 12 per cent in each of the last five years. This has been used as a measure of the quality of the business and its ability to produce high returns for shareholders over a sustained period;

■ Growth in underlying EPS for each of the last five years. EPS growth is a key measure the market uses to define a company's success and the last five years have not been an easy time to grow earnings consistently;

■ Forecast to increase underlying EPS again this year;

■ Cash conversion of over 100 per cent. We looked for companies with operating cash flows higher than operating profits as an indicator that profits are a reflection of the money available to invest in the business or return to shareholders;

■ Gearing of less than 50 per cent. As a general rule, the higher a company's debt, the more susceptible it is to upsets.

source: CapitalIQ, Investors Chronicle