Bangkok--9 Oct--Standard & Poor's
Healthy earnings growth, strong balance sheets, and a favorable interest rate environment have conspired to maintain a high quality credit profile of the S&P 500 index, according to an article published today by Standard & Poor's Ratings Services. The article, which is titled "Credit Profile Of The S&P 500 Index," says that this is the case whether measured from a debt or equity perspective.
At the end of August 2006, 73.2% of S&P 500 companies were investment grade, slightly fewer than the 73.6% a year earlier. In like manner, firms with speculative-grade ratings accounted for a slightly larger 14.8% of S&P 500 members compared with 13.6% a year earlier, with unrated firms hovering at about 12% in both years.
"The interesting point to note is that the credit profiles of S&P 500 members appear stronger than seen in Standard & Poor's equity-oriented Quality Rankings," said Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group. "These rankings are essentially a statement on the long-term growth and stability of a company's earnings and dividends." Quality Rankings awarded only 52.2% of S&P 500 companies average to above-average status last month, slightly better than the 50.6% from the prior year. Thus, according to Quality Rankings, below-average firms constituted a heftier 38.6% of the S&P 500 in August 2006 and 39.8% in July 2005, with about 9.5% not ranked.
While equity-side features of the S&P 500 are the subject of continual market attention, the credit features of this index can provide important insights, particularly at turning points in the credit cycle. This report delves into the salient credit features of the S&P 500 index, putting our Investment Policy Committee's bond-equity guidelines into sharper perspective. The S&P 500 covers leading companies in leading industries of the U.S. economy. This large-cap index is the most widely followed measure of U.S. equity market performance and corporate profitability.
Standard & Poor's ratings and other analytic services are performed as entirely separate activities in order to preserve the independence and objectivity of each analytic process. Each analytic service, including ratings, may be based on information that is not available to other analytic areas. No confidential information was shared in the preparation of this publication.
The report is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com . If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to [email protected] . The report is also available at www.sandp.com/gfir , listed under Global Fixed Income Research. If you have not previously registered with the site, you will need to do so to access this material. Registration requires minimal information and is free. Members of the media may request a copy of this report by contacting the media representative name provided.
Media Contact:
Mimi Barker, New York (1) 212-438-5054, [email protected]
Analyst Contacts:
Diane Vazza, New York (1) 212-438-2760