The Washington herald. [volume] (Washington, D.C.) 1906-1939, 1907-04-07
WALL STREET NOTES.
Union Pacific Is Center of
Chief Market Interest.
GOOD RETURN ON INVESTMENT
stock at 143 Considered Better Bar
gain Than sEany That Sell almost
Up 10 That FiEure-Rate of Divi-
dend Now Paid Can Be Maintained
Is General Belief in the Street.

New York, April 6-seale buying. which
was a feature in the early stages of the
rise in Union Pacific, has not been 50
much in evidence since the price crossed
40. but it is hardly possible and alto
gether improbable that the large inter-
ests which bought in that way up TO the
level stated have since got out with a
profit. The accumulation was too heavy
for the contrary operation to have been
accomplished in a day or so. and those
who observed what has taken place in
the stock think. therefore, that the large
interests are stin committed to the BUN
side
That there has been a heavy volume of
short covering cannot be questioned. but
that this has overcome the bullish factor
Of the genuine absorption of the stock
may we'll be doubted. On the basis of
yield. Union Pacific is still the cheapest
Of the leading railroad stocks. the return
on the investment being Z per cent. at Il
market price of about 49,
Great Northern. Northern Pacific. and
st. Paul. per cent stocks-seli only about
points under Union Pacific, 10 per cent
issue. Yet nobody doubts that under all
circumstances Union Pacific will continue
able 10 pay at least s per cent from It's
railroad operations and az least 2 per cent
from its investments. The present rate
Of payment from investments is 4 per
cent, and in the best quarters It is ex-
pected that this can be permanently adj
hered 20, so that there is little reason
20 be appreheusive Of a reduction in the
10 per cent rate paid from both sources
OF revenue.
Wall street does not appear to lave ever
fully appreciated the value OF Union Pa
eific. The stock. to be sure. was a popu-
lar favorite a year ago. but at a price
which compared to the prices Of other
issues of similar merit was very low. At
that time the dividend rate was only 5 /
per cent, but taking into account the
equalities IN Southern Pacific and the
enormous profits realized on the invest /
ments in the Hin stocks il was evident
to any one capable Of forming a judgment
on such matters that before long the rate
would have TO be substantially increased /
or an extra distribution of some kind I
made TO stockholders. To such the 10
per cent rate declared last August did /
not seem excessive. although. of course, /
they did not relish the manner Of an /
nouncement, but that the rank and file 4
did not understand the roads ability 10 /
pass at Cnce from a TO 10 per cent
basis was evident from the fact that when /
the action of the directors became known 4
there ensued rush Of shorts 90 cover that /
constituted one of the most disorderlv
scenes ever witnessed on the floor Of the I
New York Stock Exchange
II looked as If the whole trading public /
had been caught on the short side. and
that In a stock which from every stand /
point was intrinsically one Of the cheap /
est on the entire list.
Looking back over the market course
OF Union Pacific. the fact becomes clear /
that the public displayed a remarkable
lack Of appreciation of the stock from
the time the read passed out OF the hands
of the reorganization committee. A nota-
bic instance of this is afforded by the
fact that in July. 1900. the late Charles /
II. Dow was enabled to announce definite
is and authOritatively that at the begin
ming OF the following month the stock
would be placed upon a I per cent basis
and yet the prices hardly reflected the
news at all. Mr.. Dow gave the approx
mate figures Of earnings for the fiscal
year. which had closed about six weeks
before, and these showed that fully 9 Der
cent had been earned ON the stock without
including about 2 IA per cent realized
from sale OF lands, the full results for the
stock being thus more than the equivalent
Of II per cent on the 100.0O0CO0 common
then outstanding. Still the price con-
tinued to hang around 81 or IS. Even after
the rate was actually raised 10 4 pei. cent
the stock for weeks remained below 50.
the street taking il for granted that the
directors We're excessively cptimistic-or
w0rse-and that distributions could not be
continued Al the rate then adopted, il
they could be continued at all
There is significant similarity between
the arguments Of to-day on the dividend
question and those Of that time.
Il may be questioned if the streets per
ception Of the value of Southern Pacifc
Is more keen now than It has been OF the
value Of Union Pacific a all times Unless
all signs fail Southern Pacific will IN the
year ending June so next earn more than
10 per cent on its common stock
"A dollar for Improvements and a dollar
for dividends represents the most con-
sentative practice in railroading to-day Ii
so that If the directors Of Southern Pa
cihc should decide next summer to raise
the rate of distribution from to per
cent, no one could accuse there of strain
ing the roads resources. If they do not
decide to pay as much as per cent the
company viii be the richer and the
greater viii be the equity represented by
The stock. If values determine prices. s
they should, Southern Pacific Is likely 10
treat investors we'll in the next few wears
TREASURY STATEMENT.