Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
At an AA+, the company has the same rating as the US Treasury.
Corporate Bond Risks and Returns in the News Posted on April 27, 2016 by David Ott Acropolis Investment Management
Yesterday, I was in the middle of updating a chart about the basic risk and return characteristics of corporate bonds when Standard and Poor’s announced they were downgrading bonds issued by Exxon-Mobile from AAA to AA+.
It’s a shame to see another company lose their prime rating – there are now only two companies that have an AAA-rating. Exxon had held the prime rating since 1930, if you include predecessor entities,
The Exxon downgrade also reminded me that even as an AA+, the company has the same rating as the US Treasury.
Recall that in 2011, S&P downgraded the US government to AA+ so there are now two companies that have better credit than the federal government – which is funny because the government has a printing press.
Since we believe that risk and return go hand-in-hand, the chart also shows the realized volatility for each credit rating. In general, the realized volatility increases as well with a particularly sharp spike in non-investment grade, or junk, bonds.
Exxon hikes dividend, shows AAA credit rating isn't what it used to be Apr 27 2016, 19:11 ET The long-coveted AAA credit rating doesn't seem to mean as much as it used to for Exxon Mobil (NYSE:XOM) and its investors, as the company raised its quarterly dividend one day after Standard & Poor's downgraded XOM, citing generous payouts to shareholders.
With interest rates so low, many companies would rather borrow more to fund items such as shareholder returns than maintain a top rating, and XOM has hiked its dividend for 34 consecutive years.
However, the dividend increase was just 2.7%, the smallest raise since at least Q1 2006, when the dividend rose 10%.
Comments
Corporate Bond Risks and Returns in the News
Posted on April 27, 2016 by David Ott
Acropolis Investment Management
Yesterday, I was in the middle of updating a chart about the basic risk and return characteristics of corporate bonds when Standard and Poor’s announced they were downgrading bonds issued by Exxon-Mobile from AAA to AA+.
It’s a shame to see another company lose their prime rating – there are now only two companies that have an AAA-rating. Exxon had held the prime rating since 1930, if you include predecessor entities,
The Exxon downgrade also reminded me that even as an AA+, the company has the same rating as the US Treasury.
Recall that in 2011, S&P downgraded the US government to AA+ so there are now two companies that have better credit than the federal government – which is funny because the government has a printing press.
Since we believe that risk and return go hand-in-hand, the chart also shows the realized volatility for each credit rating. In general, the realized volatility increases as well with a particularly sharp spike in non-investment grade, or junk, bonds.
http://acrinv.com/corporate-bond-risks-and-returns-in-the-news/
Exxon hikes dividend, shows AAA credit rating isn't what it used to be
Apr 27 2016, 19:11 ET
The long-coveted AAA credit rating doesn't seem to mean as much as it used to for Exxon Mobil (NYSE:XOM) and its investors, as the company raised its quarterly dividend one day after Standard & Poor's downgraded XOM, citing generous payouts to shareholders.
With interest rates so low, many companies would rather borrow more to fund items such as shareholder returns than maintain a top rating, and XOM has hiked its dividend for 34 consecutive years.
However, the dividend increase was just 2.7%, the smallest raise since at least Q1 2006, when the dividend rose 10%.
At a combined $325B in dividends and repurchases, XOM's spending on shareholders in the last 11 years has exceeded by nearly 20% its outlays of $271.7B for new property, plant and equipment over the same period, according to Reuters.
http://seekingalpha.com/news/3176677-exxon-hikes-dividend-shows-aaa-credit-rating-used