New-York tribune., 1921-03-06
Union Pacific Compared to C. PR.

Question: have followed with great In
terest and appreciation your investment
notes. Your columns have been remark
bly, free from You have twice.
however, referred to the New Orleans Ter
inlnal per cent bonds being guaran-
teed by the Southern Railroad and by the
Frisco. Did not the Frisco guarantee end
in this case with the recsivership of tina
road several years ago? To-day I noticed
that you render decision in favor of
Union Pacifc over Canadian Pacific as ar
Investment stock Does not the Canadian
Pacific enjoy the following advantages over
ITS great American rival: % lower
bonded debt per mile. CD great working
capital and surplus. t3) a longer and bet
| ter dividend record, % greater and more
profitable subsidiary interests that would
help to bolster the dividend in lean years?
Union Pacific has large investments IN other
railroads. the income from which has been
decreasing, while the c. P. r.. without
taking into account its great land hold
iings, has other investments in liquid secur-
ites, In government advances. valuable
hotels. shipping. etc. Its other income"
has been increasing. Also the Canadian
road has not used proceeds from land sales
for dividends, but has kept them in an
outside Depreciation reserve. it might
be termed. Union Pacifc's earnings. as you
running at present, roughly. double the
earnings of the Canadian road, but after
allowing for the recapturc of earnings by
the United States government the two
figure up about the same. I believe. am
bothering you with this viewpoint because
it would appear that the two stocks de-
serve the same investment rating. on the
above figures, aud | would be greatly inter
ested If you have knowledge of any othe,
factor that gives the preference to Union.
personally. l should feel safer with the
Canadian stock. and hold fifty shares of
this 10 five of Union. l have also bought
gold the rights, and fortytwo shares Pull
| man. totner holdings bonds, chiefly
electric power and telephone.) 1t Is my
beiier that II these well managed corpora
tions are not to be permitted to keep the
earnings that they undeniably can make
which there would be few safe investn ents
tor business man, such myself other
than United States and Canadian govern
lnent bonds. Being an optinist, where my
country and Canada are concerned. 7 do
not look for this. nor. believe. does The
Tribune expect It'll. A. L.
Answer-You are right In 1918 the
st. Louis Il San Francisco defaulted it's
/ share of the interest on the New Or
leans Terminal per cent bonds. The
stock Of the company was owned
jointly by the Frisco and the Southern
he Southern assumed sole guarantee
on the Terminal As, took all of the
/ Terminal Co.'S stock, and the courts
have upheld it. The Canadian Pacific
IS unquestionably one Of the strongest
railroad companies in the world, and
has retained for itself all of the profit
able collateral businesses which are
more or less intimately connected with
a railroad, in contrast to so many
roads in the States that relinquished
these enterprises to other companies
Union Pacific, however, is great
banking corporation as we'll as a well
managed. well located and profitable
railroad company. There is one danger
which the Canadian Pacific faces which
does not appear to be confronting the
Union Pacific. The entire mileage of
Canada may be roughly divided in two
parts, one of these belongs to the
Canadian Pacific, the other now be-
longs to the Canadian government
The Canadian government fixes rates
for both. AS long as the rates are
fixed high enough to permit the gov
ernment railways to earn their operat-
ing expenses, and even per cent on
the government investment, our opin-
ion is that the Canadian Pacific 10
/ per cent dividend is perfectly secure.
Ii the government were to cut rates,
calling on the taxpayer to make up
the deficit, the Canadian Pacific might
have hard time. We don't believe it
! viii happen