"What is the Standard & Poor's Stability of Distributions Rating System"
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Standard & Poor's rates Canadian royalty income funds relative to each other. It uses a four step process:
1. Analysis of structure and governance
2. Business profile analysis
3. Financial profit analysis
4. Distribution analysis
Therefore, Standard & Poor's does more than simply track the dividend payments that an income fund makes. It does analyze its business structure, competition and overall business prospects.
They do of course place a high weight on actual distributions through the fund's history, but also project their future potential.
The Standard & Poor's rating system for Canadian royalty trust stability of distributions is simple to understand.
The S&P System:
SR-1 -- HIGHEST
SR-2 -- VERY HIGH
SR-3 -- HIGH
SR-4 -- MODERATE
SR-5 -- MARGINAL
SR-6 -- LOW
SR-7 -- VERY LOW
An income trust gets an SR-6 or SR-7 if they have not paid any distributions for some time, depending on Standard & Poor's evaluation on how soon they're going to start paying out dividends again.
What is the DBRS system for rating Canadian income funds
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