Dealing from Strength

These companies carry the top S&P credit rating -- indicating superior financial strength -- and their stocks are on a roll

By David Braverman

A company's credit rating -- which gauges its ability to make principal and interest payments on its outstanding debt -- is a good barometer of a its financial strength. A high credit rating means a company can easily withstand brief to moderate downturns in the economy and still have a very high probability of meeting all obligations.

Standard & Poor's Credit Ratings Group scrutinizes a debt issuer's balance sheet to determine if there are ample resources for the company to pay back what they owe. The top rating from S&P is 'AAA', which indicates "an extremely strong capacity to pay principal and interest." A notch below is 'AA', then single 'A', then 'BBB', and so on. Some ratings show a + or - to further differentiate creditworthiness. A bond rating of 'D' indicates payment default or the filing of a bankruptcy petition.

This stock screen is designed to companies with 'AAA' credit ratings. Moreover, these six companies have all outperformed this year by virtue of being up (through May) in a down market.

ExxonMobil (XOM )

General Electric (GE )

Imperial Oil (IMO )

Toyota ADR (TM )

United Parcel (UPS )

Wesco Financial (WSC )

Braverman is a senior investment officer for Standard & Poor's

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