New-York tribune., 1922-11-20
Railroads Earning Power
No. 33-Pennsylvania Railroad

/ has nevertheless increased 5ubBtanC1-
ally, for If the figures are reduced to
mileage basis gross revenues will
/ be found to have increased from $43, 400
d mile in 1912 to $5S.9O0 mile, as
| estimated for 1929, or SO per cent.
The Pennsylyania Railroad, with it's
! affiliated lines, is located in the heart
of that section of the country where
industrial activity is greatest and
serves nearly all of the important
traffic producing centers lying east Of
the Mississippi and north Of the Ohio
rivers and generally south of the ir-
regular line formed by the Great
Lakes. With all OF this great area 20
draw from, the Pennsylvania system,
which comprises less than per cent
of the country's entire railroad mile
age, actually carries about IL per cent
Of the country's entire railroad buai-
ness.
Dividend Record
The Pennsylvania Railroad Company
was incorporated in 1s46, and in 1854
the main line between Harrisburg and
Pittsburgh was opened. The acquisi-
tion Of lines already built, together
with some additional construction,
bridged the gap between Harrisburg
and Philadelphia. To-day the Penn
sylvania lines extend into thirteen
states and the District Of Columbia,
and in the aggregate compose what is
now the largest railroad system in the
world.
The Pennsylvania Railroad paid it's
first dividend in May, 1856, on capital
stock issue aggregating S10,Ss6,000.
From that date the record has been
unbroken, and during the thirteen
years ending with 1920 the annual rate
was 6 per cent, paid In recent years
on approximately $50o,000,000 capital
stock.
In April, 1921, necessity compelled
the directors to reduce the annual rate
to 4 per cent. 1t ID probable that no.
railroad in the country suffered more
from the effects Of government control
than did the Pennsylvania, and right
on top of this came the business de-
preston of 1921. By a careful prun-
ing of expenses the company was able
to come through the year with its
dividends more than earned and en-
tered 1922 with prospects greatly i'm
proved.
Pennsylvania's revenues this year
were undoubtedly curtailed by the coal
strike, but the strike of the railroad
shopmen affected this company far less
seriously than it did the other rail-
roads because the Pennsylvania had
formed its own employee organizations
and through them had dealt satisfac-
torily with It's men.
On October %, 1922, Pennsylvania
directors restored the per cent divi-
dend rate. This restoration had been
promised the stockholders as soon as
the physical condition Of the property
had been restored to normal and the
general outlook warranted the increase
in rate. Pennsylvania directors are
widely known for their conservation
and they would not have assumed re-
sponsibility for the increase had they
not become convinced that traffic
would continue heavy, that operating
costs could be kept under control and
that labor conditions would remain sat
isfactory.
Margin Of Safety of Earnings
The margins Of safety above inter-
est, rental and dividend payments
shown In the table below are based |
on the percentage that income avail
able to meet these requirements could |
decline and still be large enough to
cover them in full. Thus, in 1912, if |
total income had declined 25 per cent,
enough would have remained to pay |
rentals and the full per
cent rate on the stock; but if decline |
in total income amounting to rs per |
cent had taken place only sufficient
would have remained to cover interest |
and rentals, leaving nothing for the
stock