Back in August 2011, Standard & Poor’s lowered the U.S. credit rating from the gold standard of AAA down to AA- and placed the country on its creditwatch list. The downgrade was a significant event, although fears that the system would collapse from the action proved unfounded.
As we slowly close in on that ignominious one-year anniversary, what has changed?
Well, the markets are somewhat stronger now but are showing no real direction, and the economy continues to muck around, looking for some way to sustain its recovery. Indeed, heading into the summer, election season and fall budget session, it’s unlikely we’ve earned that AAA rating back.
The world still views the U.S. as the best economy and risk out there, but is there anything that’s better (read: less risky) than U.S. debt?
Why, yes, there is. Four AAA-rated companies, conveniently located on American soil: ADP (NYSE:ADP), Johnson & Johnson (NYSE:JNJ), Microsoft (NASDAQ:MSFT) and Exxon Mobil (NYSE:XOM). More important, with the 10-year Treasury yielding 1.65%, these stocks not only have better credit than the U.S., but they have dividend yields that represent up to 224 basis points of premium over the T-note.
Does the premium and rating mean the companies are immune from downward stock price moves? Of course not. But these dividend stocks all have steady businesses and all also have the potential for capital gains. With that in mind, let’s take a look at these four AAA-rated stocks that are better buys than U.S. debt: