"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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