National Republican., 1883-05-24
The Case RestRted.

| rs ulNlucnds during all VnOse years, DeSlueS
100000 which it had expended in additions to
its works. The consumers Of gas had been
charged such rates as to yield the above
profits. Tho dividends amounted TO $722, 900,
which added to the outlay Of s500,O00 made
S1,222, 900 as tho profit on tho original
investment, being an average Of $64,3l5 per
annum, or 123 per cent The process Of
watering the stock was then commenced.
That is TO say, the value of the works having
been doubled, the company doubled its stock,
aud gavo each member, without price, an
amount of stock equal to what he already
owned. They had charged such high prices
for gas that the stock had not only yielded
the liberal dividend of 7.6 pei cent. q year,
but had doubled itself besides. Tho public
had generously contributed, or rather pa
tiently submitted to the exaction of, $500, 600
more than "a fair return on the investment"
and the company literally decided to put
that contribution into additions to the works,
ard then tax the people for their own gener-
osity by giving themselves that amount in
stock. Accordingly from 1868 to 1872 the
gas company fixed their price at ratio which
would yield Ia per cent. a year on just
twice the amount originally invested. This
looked better than II would to have declared
n dividend of 90 per cent. on the original
stock. The gas consumer would rather pay
IA pcr cent. on So, one Of which is mere
shadow of tho other, than to pay 2s per cent.
ou the same dollar with no shadow to make
1t look like two. This is the delicate opora-
tion known as watering stock. Tho next
four years and a half found the gas company
less modest. 1t again watored its stock
half million, and then, on the ono dollar
and two shadows, it levied an aver
age annual dividend Of 40 per cent,
being 100 per cent. per annum on every dol
lar originally invested. 1t then poured III
another stream of water, increasing the
amount ofstock from 81 500, 900 on to So 900 0Oo
On this it had, up to two years ago. declared
dividends of 10 per cent. per annum, being 90
per cent. on the original investment In adj
dition to this fair return" it had slowed
away thrce-quarters of million Of dollars,
undivided, "to enable the company" $50 said
President BartoD "to make such additions to
their works as will allow them to re-
duce the price of gas 10 its lowest
point, both for illuminating and fuel pur-
poses, in hope that a very large increase Of
consumption may compensate them for the
outlay" 1t is fair to suppose that this liberal
corporation has during the past two years put
its best foot forward, and that we now have
its very bottom figure as to price and its
highest possibility as to quality. II has been
the proud privilege Of our people during the
past thirty.one years to pay the Washing.
ton Gas company over ten millions of
dollars profit on an investment Of
half million, which is more than twenty
dollars for one, or an annual dividend of G6.s
per cent. There is not another such an
enterprise in the United States for watering
its stock and increasing its rates of dividends
at the same time.
pie by making them pay dividends on fictitious
or watcred stock, which only represents i'm
provements paid for by themselves in high
rates, and not out of the dividends Of stock
holders at ALL has never boon moro forcibly
presented than by the Hon. James +. Wilson,
now senator-elect from Iown, in an address
delivered by him on the transportation prob
lem before the northwestern convention, held
at Davenport, Iowa, May 20, 1881. 1t hits the
case under discussion so we'll that we give the
entire passage in relation to stock watering
practices:
| l give you this illustration. a railway is con-
structed at cost Of sl0,0OO0Oo. 1t is not only
necessary for the company to earn operating ex.
penses interest on its debt, and proper to declare
reasonable dividends to It's shareholders but It
must maintain its property and perfect II by such
| improvements as are calculated TO carry 1t for
ward 10 the standard OF q frst-class road. The
| public, as well as the company, have an interest
] in having these things done for the better the
| road the safer and more satisfactory will be its
service. Upon this proper plan the company con-
ducts Its affairs for the term of ten years 1t then
has superb property, excellent In all It's condi.
| lions and appointments. Its roadbed IL perfect,
| Its bridges of the best character, Its equipment
unsurpassed by any other road. Its service to the
public is SAFE speedy and satisfactory. II has come
up to this standard through the steady growth of
ten years existence The managers take an account
for the ten years, and find that for each one they
have paid operating expenses interest on the
| bonded debt, reasonable dividend TO the share.
holders, and expended 81 zoe 900 In the subsan.
| tial betterments and improvements that have
| placed the property in its satisfactory condition,
or for this later purpose 100000 for the entire
| term. on this showing they say: This money
was earned by u.s. and we had perfect right to
divide IL among our shareholders as dividends
from year to year. Instead Of doing so we have
served the public by giving them better road
| than we could have done II we had divided the
money. We have administered the affairs Of the
| road Justly. Our improvements have given the
! people better road and better service than we
| could otherwise have done. This has cost us Sl0
100000 ofthe money we have earned, 90 that the
road now stands us $40, ,0O0OO0 or just double the
| original cost. Our share capital remains at the
original sum. We have only paid dividends on
| that amount. But the road has cost sl0000,0OO
more, and II is but just that this cost should be
| capitalized, and our stock shares Increased TO the
actual cost, which is s200OO,0oo"
Now, this is a plausible statement Of the case
and II looks so fair that we do not wonder at per
SONS being willing TO accept II who arc interested
in believing It to be a correct presentation OF the
facts. But is IL correctly Who supplied the $40
| 100000 now to be capitalized and represented by
CHI n the