Investors who are mad at the pandemic bill may not have much to fear if one indicator is anything but.
According to a report from S&P Global Market Intelligence, the likelihood of US companies incurring their interest payments rose to a two-year high in Q4 2020 based on some key data.
Questions about the sustainability of high debt are raised amid concerns about how US companies will pay their bills caused by the COVID-19 pandemic.
The S&P analysis tracked the interest coverage rate, a measure of how many times a business’s income, before interest and taxes, can cover its cost of debt. Investment-grade companies’ interest coverage rates rebounded to seven times their pre-tax income, up from a five-fold low in the second half of last year, even as investment-ranked firms. issued a record 1,687 trillion USD bond by 2020.
And a company’s balance sheet may continue to be corrected as earnings improve this year. Profits were up about 34% in the first quarter of 2021 for the S&P 500 companies reported to date.
Big U.S. corporations capitalized on the Federal Reserve’s unusual response to capital-aid markets last year, exploiting the line of credit and borrowing as much as possible to see a sharp decline. Sudden cash flow and revenue due to nationwide shutdowns and safety concerns surrounding coronavirus.
Investment firms, in particular, benefited from easy loan terms last year, reducing borrowing costs at extremely low levels.
Strong earnings rebound has pushed power stocks to new heights this year, with the S&P 500
are on track to end at an all-time high on Monday. The broader equity benchmark has risen 11.5% for this year, at last.