New-York tribune., 1921-03-27
Californian Thinks Investors iii In
formed

/
formed
Question: received the recommanaa
tions from your financial editor and iln-
;ned'ately put them into effect Uos The
are doing a blk work in this department,
The average American really knows but
| little Of the securities into which he puts
his life savings. and tho investment houses,
| sren the best OF them, rarely recommend
securities of the class that arc suitable for
sn ultra conservative inyes,ments Most OF
/ ner cent basis and are hardly better grade
,aan can be class'i'ed as business mans
! the servica you have rendered to ms,
Might ! ask II you think that the Cuban
| American Sugar first mortgage collateral
per cent sinking fund bonds are suitable
! for an investment requiring q sound basis
| but not the grade usually referred to as
"gilt edge? Are the Pacific Gas aud
| Eectric nrst mortgage per cent bonds
superior ss an investment 10 the now Z
per cent ISSUE and how are beth issues
rsssr 70 tho cailfornia s personal w property a W
| tax, because, at least for the present, II
does not affect my mother as she ,a 10 stiii q
1uire practically all her holdings. to be
California maunicipais II she shouid he tax
able: for the tax is heavy,--G. NJ q,
! California
Answer There is no Pacific Gas and
Electric first mortage s per cent bond.
SO we assume that your question refers
to the compas,y's general and refunding
mortgage gold 5s, Series A, 1912, and
that you wish them to be compared to
the twenty-year first and refunding rs,
Series A, due December ], 1910, which
the 5s underie. In the first place, we
think that all the obligations of this
company are entitled to good rating,
because it was one OF the few public
utilities which came through the re-
cent period of bad times without hav-
ing to reduce it's dividends on it's COM
mon or preferred stock, which call for
about $3,477,000 a year. The company
serves 1879 cities and towns in Central
California, having combined popula-
tion of nearly 100000. with gas, eec-
tricity, street railway facilities and
water. The company operates twenty
four hydro-electric generating plants,
| four modern steam turbine electric
| plants and has 1856 miles of lines,
carrying 100000 horsepower. 1t has
twenty gas plants and forty-four miles
of street railway in Sacramento, and it's
franchises are perpetual. The general
and refunding 5s are subject to $49,-
7s8,100 prior liens, the obligations of
constituent companies. The IS are
outstanding in the sum of 6,542, 900,
which does not include Sl6,000,O00 de-
posted as collateral for the slo,ooo,0oo
! tive-year per cent notes, due 1925.
The first and rcfunding rs, 1940 which
you inquire about, are secured by
mortgage executed jointly by the Pa
cific Gas and Electric Company and
the Mount Shasta Power Corporation,
covering the properties of the latter
company by direct first mortgage and
the properties Of the Pacific Gas and
Electric Company by general mort
gage. There are outstanding $4,000
600 of the rs. The Pacific Gas and
F,I0CtrIp CnnnapN
3o5,S34 in 1920, compared with $26, ,5S2,-
6o1 IN 1919. Net earnings were $1O,-
142,s27; interest charges, S4,920,436
and Sl,000,OOO was reserved for depreci-
alton, the same as in 1919. There was
a surplus of $3,915,8b4 and a balance
after dividends of $437.718. The com
mon stock earned 1928 a share in 1920,
compared with $3.50 in 1919 We con-
sider Cuban-American' Sugar first mort
gage collateral per cent sinking fund
bonds, due March IS, 1881, good in
vestment. The bonds, of which there
are Sl0,O00,000 outstanding, are secured
by the pledge of S16O0O.000, which is
the entire outstanding issue of sub
sld1ary companies first mortgage bonds.
The Cuban American Company owns all
OF the capital stock of these subsdi-
arles, and has the largest sugar estate
IN the world. The bonds have a sinking
fund provision calling for the setting
aside Of $25o,ooo quarterly beginning
June 15. 1921. This fund is to be used
to buy bonds in the market up to 105.
The bonds are cailable as whole. but
not in part at l07ia on any interest
date on thirty days notice. Interest is
payable March 10 and September Is.
The normal Federal income tax. how
eyer, is not paid by the company. In
l92o the company earned S10,l16,155
and it's interest charges amounted to
| s4os,9s4. Eight per cent on the present
issue would call for $500 900. but this
| apparently viii not be in addition to the
l920 interest charges, but in lieu there
| Of, since the proceeds of the sale OF
these bonds is used to pay off interest
| bearing bank loans. An executive Of
llccr of the American Sugar Refining
| Company, in commenting on the pros.
poets of that company mentioned the
fact that the American had recently
bought large sugar estate in Cuba
and that, in his opinion, sugar produc-
ers would be likely in the immediate
future to have larger and steadiel
earnings per dollar Of investment thar
would the re6ners. We are afraid VOL
are bit harsh in Your judgment of in
vestment houses. You must remember
too, that new money comes high nova
| days.