What Do the Standard & Poor's Credit Ratings Mean?
For over a century, Standard and Poor's (S&P), a division of McGraw-Hill, has been contributing to investment decisions with its research, indexes, risk analysis and credit ratings.
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What Are Credit Ratings?
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Profits Credit ratings measure S&P's evaluation of an organization's ability to repay securities-related debts. An organization's current financial strength and position as well as current market conditions determine its rating.
Credit Ratings vs. Buy, Sell or Hold Recommendations
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An organization's credit rating is only part of its investment value, and should not be confused with buy, sell or hold recommendations.
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Investment Grade Ratings:
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AAA, AA, A:
S&P's highest ratings, with AAA indicating an organization 'extremely' capable of repaying obligations and AA and A indicating good but not invulnerable financial strength.BBB, BBB-
Indicative of current ability to meet financial commitments, these ratings also indicate greater vulnerability to external economic factors, with BBB- being the lowest investment grade securities.
Non-Investment Grade Ratings
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BB+ down through D
Considered speculative (risky), organizations can currently be in default (D) and all are financially vulnerable.
Caveats
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Credit ratings are one indicator of fiscal fitness; they should not be the only factor in an investment decision. Investors should consult an adviser to evaluate their own portfolio, risk tolerance and market conditions.
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