(02-25-2019, 06:32 AM)rayray Wrote:(02-22-2019, 11:56 AM)Otter Wrote: Credit rating is becoming an ever more important part of my portfolio strategy for selecting and keeping stocks. Companies with lousy credit don't have a lot of room to maneuver when times get tough. As I mentioned in the initial post, BBB+ and better is my preferred range for creditworthiness. KHC today (BBB rating) just reiterated that sentiment.
Perhaps no surprise that some of my worst-performing holdings have lousy credit ratings:
BT: BBB
CVS: BBB
F: BBB
GIS: BBB
SKT: BBB
T: BBB
Granted, I have some dogs with good credit (NGG, QCOM, WFC), but those downtrends tend to be from unique issues (regulatory, Brexit, lawsuits, etc.). Clean balance sheets will outperform in the next downturn.
Correct me if I'm wrong but I thought BBB/Baa2 credit ratings were acceptable, not the best obvious but not really considered lousy or bad credit ratings for a business...not to be funny but wouldn't they be better then say, "ok"....lol...I do love those commercials!
What site do you guys use to check CR, other then googling the ticker's CR? Fidelity doesn't make it easy unless I'm missing the CR on their site.
Honestly, I catch it while reading the press releases during the course of research prior to buying, but it is also in the analyst reports I get free with my brokerage accounts like TD. BBB by itself is not the end of the world. BBB + dividend twice as high as the A team's credit + a company in a slow or not growth industry better concern me though. Add in some mediocre or worse management and you have a perfect storm brewing for a dividend cut and the share price drop that goes with it.
Personally I've been whacked about three times over my investing career, and the above were usually in play. The high div yield trap was almost always there. Uber growth momentum stocks are supposed to be the risky plays, and the Div stocks the safe haven. That's not quite how it's been in my real world port, when the Div goes way above market (S&P). There is nothing profound in this post, but our forum tendency to include the high Divs as too good to pass up has more risk than we collectively perceive, or at least admit here. I share my fails in some detail because I hope to warn others. I don't miss a chance to share my wins so it evens out.
