New-York tribune., 1922-03-06
| nadvisablc for n Teacher

"a Vuest t, VIII you siudy inform me as
eral Tr,,So g'T"o,og s ana rharactor OF tho red-
Fifth Avcnuc? saIosT,ap ,' -. n dom OF 800
XIV uiE description OF its baoi,iug. Weld
veat,nont ,,',', p"ln' e' IL "a higher grade in
V,n.j,e"' man mortgages or 4avinge bauj,a
Wheh caused 'ae TO wonder r7bot r,-',
sn0"s ,9, M told him that you'd consnlf
aD,' "h'cA he apparently did nor 9,,nr
+. - 'ulis roeci ed, az shall oaes
cailin% max oe 'r'oMe's know nhon he is
Hnswcr-- We do not sec how tho
Ia. IS".cS'nan 10 whom you refer could
nave truthtully said stock in thc rcd
cral Trade Acceptance Cornorot;o, u.a., u
higher grade investment than mort.
cages or savings banks" He nrohabl,,
meant that the present dividends IN
W nc preferred shares paid Il higher rate
,"Hn those Of mortgages and sav;nrr
pn"Ns' bnt, as for being "higher
grade lnVestmcnt" there & no cor,-
pari7on. The company IS less than q
year old, and though it should if wclI
managed, be profitable to stockholdors
""ol IT has demonstrated its carninc
vdpac'ty over greater period. we
must regard its stock rs speculativo
ms docs not mean that it NECESSARILY,
- p'"cea IN tho same class as stocks Of
an new companies, some Of which uro
Selilhg schemes As matter Of fact
inc members Of the corporation for thc
most part arc experienced and feel CON.
Hochc that they can operate their bust
ness apccessfullY. Along this line. it
must be borne in mind. however th,t
VITA the increase of funds avajlahlc
Tor commercial purposes and tho con
Sequcnt casing Of money rates. nrofifs
IN ruyiAg and selling trade acccDtances
become smaller. The risk, it $ trno
may be reduced in that sh-iukago in
Va'ue o. collateral Will probably rot be
SO great because Of lower commodity
prices. his aoplics. for instance TO
auyomopl,es, prices of which have been
Ieouccd drastlcally in the last year or
tWo. 1t is apparent, therefore. that
TINS corporation must demonstrate its
earning power under conditions which
seem TO be growing less favorahle to
prohts as money rates decline further
pcirrc the stock can be rated as AN in
'catnent. The corporation vas formed
m april, 1921, with z capitalization of
9V'oUO, . per cent cumulative preferred
stock, 500 par value. and $4,000 shares
OF n" par value common stock. The
stock IS being sold by the Business IN
Vestors Corporation, which is affiliated
with the Acceptance CORPORATION in
n
tcrested IN the former. The Investors
Corporation sells the Acceptance Cor
poration stock IN units of two shares
OF preferred and one of common for
S2'O, giving the common stock q value
OF $40 share. The original Offering
WAS $50 for tho unit. For this service
tne investors Corporation receives q
snare or the common stock for each
unit sold. so that it will share equally
With holders Of comolon stock in anv
disbursements declared on the junior
ISSUE. 50 far three quarterly dividends
OF - each have been declared on the
preferred stock and sum has been
set aside, it is said, to meet the fourth
quarterly payment when It becomes
que. No action has been taken in re-
gard to dividends on the common stock
TOR the present year and directors
have formulated no policy for future
action. Current yield on the unit Of
three shares of stock, therefore, ia
slightly less than per cent and until
dividends are paid on the common or
purchase of the preferred shares
separately is permitted, the yield will
be determined by the price charged for
the common. SO it may be said that,
although earnings on the common
shares at some future date may make
the stock worth moro in the long run
than mortgages, for the present The
prospective purchaser who cannot
afford, or does not wish. TO speculate
will find more attractive securities,
since well secured bonds which give
every indication of safety may be OBJ
taincd with per cent coupon. 1t is
our opinion that an investor unles he
or she can afford to put her funds in a
security that lacks ready marketability
for an indefinite length of time should
consider something else for investment
purposes Suitable securities are fre-
quently mentioned in The Tribune.