Omaha daily bee. (Omaha [Neb.]) 187?-1922, 1906-08-22
UNION PACIFIC FINANCES.
ABILITY of the Company 60 Maiutsin
Tea Per Cent Dividends.
wall Street Journal


The question Of the hour Is: How long
will the Union Pacific be able to maintain a
10 per cent dividend on It's common stock p
The payment OF this dividend calls for
lseo2 7po per snnum. OF this amount
t7,S4oOo0 is to be divided out OF "other In
come" and the remainder. about t11. 80 600.
must be earned in net by the Union Pacihc
Railroad compsny's lines.
There IL here a very subtle distinction.
Under the prevailing policy in American
railways the Union Pacific railroad would
not be pustihed in paying out the whole,
or nearly the whole, OF its net surplus after
ixed charges in dividends. There Is moth
ing, however. deserving of much criticism
in the distribution Of 'other income" TO the
stockholders
The ''other income of the Union Paoific
IN 1905 amounted to t.7s,isl, or almost
exactly per cent on the stock outstan ding
at the end OF the year. There Is not the
least doubt that in 1907 this will increase
to ts,oooooo Everyone knows that the
Union Pacific Investments during 1905 have
been IN. a transition state There is no
doubt, for instance, that II the Union Pacific
sold its Great Northern at $500 II can make
more money out of that cash than the I
per cent paid by Great Northern. This is
particularly true, inasmuch as the income
account of Union Pacific does not contain
single trace OF the rights" worth SS5
per share, on Great Northern stock in 1906
This, OF course, ignores the fact that in
1907 Union Pacific will receive an additional
f4,Do00o in dividends on It's so. 900 OF
Southern Pacific common. The "other in
come" in that year may total s13,ooooOo or
over per cent on the Union Pacific COM
mon.
II Il be granted that the Union Pacific can
conservatively distribute 100000 a year
of ''other income" the 10 per cent dividend
does not look so extravagant. II this 'other
income" is eliminated from the 1905 report
the surplus after preferred dividends would
be t17.4b20Oo. Including the betterments
charge II would be about 49, 900.
The per cent dividend would call for t11,-
10000. IL therefore appears that the SUR
plus from operations, after the common
dividend, would be about 100000.
II the net earnings of the Union Pacific
should shrink sS.ooo.0oo the company would
be practically forced to cut its dividend
This would be a shrinkage OF about q per
cent. That looks very big, but It is almost
exactly the difference between the net earn
ings IN 1903 and 1905. In the light Of this
fact 1t cannot be considered by any means
an impossible contingency.
The Union Pacific is a magnificent rail-
way. In physical condition, in command
Of trsfio centers, in growth of tributary
territory. in trafhc-producing Affiliations by
land and sea II Is second to no railway In
the west. II has q wider scope than any
other transcontinentsl. Consequently, its
business must have q greater stability and
continuity under all circumstances than the
tranie of any purely granger railway, or
any transooutinenth without similar af-
filiations.
Mr.. Hartman has undoubtedly created
the most magnificent system Of the west
His belief that II can maintain 10 per cent
dividends Is entitled to respect At any
rate the company can certainly continue to
pay 10 per cent as long as the rate situa-
ton and business conditions continue a.
thew ara.