New-York tribune., 1922-11-15
Railroads Earning Power
No. 28-Union Pacific

Pacific was earning Mt q rate that in
dicated better than 10 per cent on it's
common stock for the current year.
Compared. with the corresponding
period in 1921, gross revenues for the
first six months of 1922 were about
S3,400,000 less, but operating expenses
were also lower by about an equal
amount. so that net earnings for the
two periods were practically the same.
! he next three months, however, tell
different story. Beginning with July,
the monthly reports showed substan-
. tial decreases in gross compared with
the same months a year ago, because
Of lower freight rates and the cur
tailment of traffic due to the strikes.
But expenses did not decrease in any
like proportion to the decrease in gross,
with the result that for the three
months ended September 30, net earn
ings recorded q decline amounting in
round numbers to $4,7O0,000 from the
total reported for the same three
months in 1921.
since July 1, coupled with the higher
expense ratio-74 per cent for the
three months this year, as against SO
per cent last year--that has lowered
the seasonal trend and made it appear
doubtful as to whether the company
would be able to earn the full 10 per
cent dividend on its common stock
this year. There are, however, three
months earnings still to be reported,
and during those months, If the ex-
pected heavy traffic develops, it is
quite possible, in view of the better
ment in labor conditions, that the
seasonal rate of earnings will improve
sufficiently to overcome the threatened
deficit.
Dividend Record
The Union Pacific Railroad was in
corporated in 1897 as successor under
foreclosure and reorganization to the
Union Pacific Railway. The preferred
stock is entitled to receive per
cent non-cumulative dividends each
been paid without interruption.
The first dividend, 3a per
cent. was paid on the common
stock in 1900. Seven years later the
annual rate had reached 10 per cent
and remained there until the end of
1914, after which the rate was reduced
to per cent for two years and then
went back to 10 per cent, where it
has since remained.
Between 1913 and 1915 there was
drop of $6,000,00o in the amount of
i4'Spiic ailHudliy IcCSiFeu from sources
outside of railroad operations, due to
the companys forced relinqushment
of it's control of Southern Pacific and
distribution of its Baltimore & Ohio
holdings in the form of a special divi-
dend.
Margin of Safety of Earnings
The margins of safety above interest
and dividend payments shown in the
table below are based on the percent
age that income available for interest
and dividends could decline and still
leave sufficient to cover interest and
dividend payments. Thus, in 1912, if
tctal income had declined II
per cent there would have been left
just enough to cover interest charges
and preferred and common dividends.
1t total income had declined 62
per cent, nothing would have been
earned on the common stock, but there
would have been sufficient to cover
fixed charges and preferred dividends.
decline of 70 per cent in total
income, however, would have wiped out
all earnings for both preferred and
common, leaving barely enough to
to cover fixed charges.
The minus sign before the in the
common dividend column against the
year 1922 means that the total income
indicated for the year is per
cent short of the amount necessary to
pay 10 per cent on the common stock.