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Morningstar's New Stewardship Ratings for Stocks

See our initial ratings on more than 250 stocks.

Morningstar Analysts, 05/01/2012

Our corporate Stewardship Rating represents our assessment of management's stewardship of shareholder capital, with particular emphasis on capital allocation decisions.

Analysts consider companies' investment strategy, history of investment timing and valuation, financial leverage, dividend and share buyback policies, execution, management compensation, related party transactions, and accounting practices. Corporate governance practices, such as poison pills and staggered boards, are only considered if they've had a demonstrated impact on shareholder value.

Analysts assign one of three stewardship ratings: "Exemplary," "Standard," and "Poor." Analysts judge stewardship from an equity holder's perspective. Ratings are determined on an absolute basis. Companies are judged not against peers within their industry, but against ideal stewardship of shareholder capital. Most companies will receive a standard rating, and this should be considered the default rating in the absence of evidence that a management team has made exceptionally strong or poor capital allocation decisions.

Ratings under the new methodology are now available on more than 250 companies, with supporting written analysis in the Management & Stewardship section of the company reports. Analysts will roll out the methodology to the remainder of Morningstar's coverage universe throughout 2012. Stewardship grades assigned under the previous system will be removed from company reports, as the old grades aren't translatable into the ratings assigned under the new methodology.

Click here to see our initial ratings on more than 250 companies (pdf).


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