Savannah morning news. [volume] (Savannah) 1868-1887, 1881-12-28

Dividends Will Tend TO Keep Ihs
stock at Home.
Editor Morning NesOs: Presuming upor
your generally accepted conservatism on al
matters of local or broader interest, ash
space in your columns to correct an errol
into which you have inadvertently fallen
and through which you are made to visi
with an unmerited criticism Colonel w. NJ
Wadley, President Of the Central Railroad
and Banking Company of Georgia.
In your issue Of the 22d inst, under the
bold head line, HThe Proposed W altering OF
Central Stock" occurs this sentence: ''Lasi
year the stock was virtually wstered 40 pei
cent. by means of per cent. scrip divi
dends, and now it is proposed to water Il
so per cent. more" Before penning these
words you should have perused with care the
last annual report of the President and
other officers, issued at the close Of business
September 80, 1881. In that report Colonel
WadleY enters into full Vindication of the
issue of scrip, which you charge as a water
ing of the stock of the company, In
these words, on pages and 9 OF bis OWL
report:
I'm view Of the fact that dividends have
been withheld from the stockholders and the
money expended in constructing and improv
ing the property of the company, the Board
of Directors during the past year concluded
that it would be but Just to make distribu'
tion of debentureS. or certificates of indebted
he CFon xhOId 70 rCof
somewhat for the interest which they were
fairly entitled to upon the original Investment
Acting upon this view it was determined to
issue debentures to the extent of DO per cent
on the capital stock Of this company and un
der the terms Of the lease of the Southwestern
Railroad, its stock was entitled to 80 per cent
To persons not familiar with the past history
OF this company 1t may appear that this oper-
ated as virtual watering of the stock, whereas
In point of fact it has not been equal to the
amount due the stock, allowing only per
cent per annum simple interest. This is dem
onstrated fro II the records of the company
and is illustrated by an original subscription
to the stock made by the late George
B. Cumming. Esq This stock has been
credited with every dividend from the
inception of the company, and il equal to divi.
dends of only about $40 per cent. per annum
on the investment. and lacking 60 per cent. on
the stock OF paying per cent per annum, sim
pie interest on the amount subscribed. 1t is
no answer to say that these debentures have
therefore, the distribution is unjust. for it
might as well be said that it would be unfair
for the purchaser of any property to benefit
from what he purchases Besides, If the pres
ent stockholders are not entitled to these de-
bentures, who are? Certainly not the public,
as they are enjoying, at a reasonable rate, q
property that has actually cost more to pro
duce than is represented By the capital stock
and the Indebtedness of the company, incLasd-
ing these debe7ltuTes. This statement is made
to correct the impression that the stock has
been watered, whereas, in point of fact it had
been made stronger by the accumulation of iD-
terest properly due 10 the stocf holders but
instead of being paid to them has been expend-
ed upon the property of the company
l am sure, my dear Mr.. Editor, II you
had read Colonel Wadley's statement of
the case you would anyhow have greatly
modified your language, however bitterly
you may feel inclined to resist the efforts or
General Alex ander and a majority of the
stockholders, IN Savannah and elsewhere, to
secure the declaration of another scrip
dtSidend. Your reasons for this opposition
You have given the public and l will deal
with them hereafter when intervening mat.
ters are disposed of. Now, Colonel Wadley,
while admitted to be very clear headed and
conscientious, aud believing always to the
very letter every word he utters, is not ac-
cused of being person skilled IN Tan, and
you may rep'y to his construction of the
dCbAOu VI 6uO OOdIu Va OuCCbOIb AL
a scrip dividend, that. while he may truly and
honestly state the intent and purpose, the
legal effect that must control lay beyond
his intellectual grasp, and after all his eff
forts and protestations his stock has been
a0GteTed, and that you "do not believe the
road will be able to stsgger under 1t and
make future dividends" II to this 40 2 ar
cent. "alreadY issued, another OF so per
cent. is added" as now clamored for by
General Alexander and his followers.
But reverting again to the main question,
whether scrip or stock, interest or principal,
your issue of the Esd instant forever settles
the question by the publication Of the
elaborate and exhaustive decision of the
Supreme Court In re Miller VS. Central
Railroad and Banking Company, Involving
the principle, In which they affirm, as
Colonel Wadley had previously held, that It
was nothing but the accumulation of divi-
dends withheld divided en- masse. II the
Colonel, therefore, was not of the profession,
you must, at least, accord him credit for a
remarkably clear judgment 20 have been
right, even In legal sense, upon an issue
about which the bar of the State were so
divided.
Now as to future divisions and their iusti-
fication and good policy, 1 must once more
quote the language of Colonel WadleY. In
the extract from his own report already re-
ferred to, after an evident feeling of satis-
faction that he has dissipated the idea of
stock watering advanced BY you, says: "Cer-
tainly not the public, as they are enjoying
at reasonable rate, a property that has actu-
ally cost more to produce than is represented
By the capital stock and the iadebtedneSS Of The
company, including the debentllres." Col.
Wadley only refers here to the road it
self, and dppurtegGnceS, exclusive of
steamship line, interest In several
extremely valuable leases of railroads and
some million in the stocks and bonds OF other
corporations, and of which, as II to give en-
phasis to his appreciation, namely the road.
he says "the public are enjoying at a rea-
sonable rate" This language is used after
the scrip dividend has increased the liabili-
ties of the company. At the time of the
declaration of this dividend it was notori-
GUS that a part of the Board of Directors
were disposed to make both cash and scrip
dividends larger. And ii 1t could have
been made larger then it is far
safer to do it now with the
added accumulations OF the past six
months and the light thrown upon the con-
dition OF the company through the medium
OF the report OF the President and other
officers, September 30th, 1881. And vet
that document does not show all that
should make stockhOlder value his prop
erty. because 1t does not contain more ..islan
incidental references to the Interest of the
Central In the Western Railroad and Mont
gomery ard tsdfaula Railroad of Alabama
...u their fattering exhibit for the year,
and the results OF certain profitable leases.
IN the light of these facts and
the declaration of Colonel Wadley be-
fore alluded to, for one, feel satisfied that
afurther scrip dividend can be paid and Just
ly too, but as TO what per centum, each one,
who will take the pains to dissect the com
panY's showing, can Judge as well for him
self as any other outsider can Judge for him.
When as a question before the board as a
change from the old policy Of accumulation,
am sure 1t will receive wise consideration,
and shall be contented by their measure
of the company's ability in per centums.
As to the policy of further scrip dividends
II sustained by facts and figures, have
never heard an objection that carried
any conviction to my mind, possibly be-
cause, as Artemus Ward expresses II, was
'too obtuseH to appreciate an argument.
On the other hand, the foremost argument
is drawn from the reasons assigned for the
first dividend. By Withholding dividends
and declaring delayed ones in lump, from
the unfortunate wording OF the lease of the
Southwestern Railroad Company the stock
holders OF that corporation enjoyed an ad-
vantage in that division of exceeding twenty
per cent, ss against the shareholders of the
Central. For all the time the CentraTs
shareholders were either without entirely
or only receiving reduced dividends,
the Southwestern's were getting
their seven per cent. regulari--
and in the final division took as ai"ht..s tn ten
and as though the Central shareholders had
enjoyed dividends all the time in that pro-
portion, when 1t is capable of demonstration
That the noa0 acknowledged dividends that
were "ltneeid from the Central sharehold-
ers constituted, compounded. nearly tbTee