The Washington times., 1923-06-12
HOW DIVIDENDS
RULE PRICES.
Of STOCKS
Expert. Analyses Conditions
That Investors Face Cites
Some Examples.
BY w. s. COUSINS.
(Copyright. 1928. by Cosmopolitan
NeWs Service.)

q
(Copyrirht. 1928. by Cosnopoiitan
News Service.)
NEW YORK, June 1.-THE basis
of all investment 10 income return
either present or prospective.
whether the investor engages as q
partner in some great national en-
terprise through the purchase Of a
share of its capital stock, or be-
comes a creditor through the acqui-
sition of it's bonds in the investment
market, he is interested primarily
in its successful financial operation.
In the first instance his interest
lies in the prospect OF gain through
sharing in the fruits OF the earnings
of his company; in the second. In
the maintenance of its credit, so
that Its bonds will command firm
and active market. !.
1t should be. understood, at the
start, that the officers and man.
ayers of a corporation are under no
obligation to maintain h1gh mar
ket rating for their stocks or bonds,
but the very fact that they nave
listed them on the stock exchanges
implies desire on their part to
have them widely absorbed by IN
vestors: and price stability ls an
important factor in accomplishing
that result.
Controlled BY Dividends.
In the case of dividend stocks.
particularly. the liberalitY OF the
directors in relation to the regular
or special cash or stock dividends
may easily be determining fac.
tor in the selection or g line OF
stock by an investor.
1t was in recognition or that Iact
that directors OF the american
Telegraph and Telephone Company
made their last increase IN the
dividend rate from TO per
cent and in his public announce
ment President II. B. Thayer en-
Dhatfcally stated that it would be
the policy of his company to main
tain this high dividend rate In or
der to appeal to a wide circle OF
investors.
In contrast to the policy OF the
American Telegraph and Telephone
Company may be cited that OF the
American Can Company. Though
good money maker ever since
its organization in 1901 this COM
pany only few months ago en-
rolled as q dividend payer, and
consequently its stock, Though an
active football of the professional
pools and cliques in the stock mar
ket, did not have a wide invest
ment appeal.
Considerable criticism lately has
been heard of the refusal or the
directors Of the United States Steel
Corporation, long considered the
| leader of investment stocks, to dis
tribute a larger share of its cur
rent earnings as well as its accu-
muIated surplus, to its stockhoio-
ers.
Within the past ten years United
States Steel has reduced It's DOnaeu
debt by more than 100000. 900. in
creased its working capital 70 $zsU,.
600 900. and expended $685.. 1000. OOO
on construction and plant expansion.
It's earnings at the present time are
estimated at $14 per share, ana
with its enormous surplus or $49J.
139,415. the book value OF its stock
is close to $3.50 share.
Only a few weeks ago the Off
GERS Of the company were buying
the stock in the open market for
their own employees at 107. against
current market quotations OF 30.
The most plausible explanation for
the slump in steel common is the
unattractiveness Of the stock from
dividend viewpoint
One of the most common COM
plants of the railroad companies
is that they are unable to raise
new capital by stock issues. Not
many of the stocks are in a finan-
cial position to make their stocks
attractive from an investment stand.
point, and hence are compelled to
increase their bonded debts when
ever the need for new funds arise.
Earnings by Railroads.
But a number of the roads are
making good profits today and
could well afford a substantial in.
ments. On current returns Atchi.
son is earning close to 16 per cent
against dividend disbursement of s
per cent.
New York Central is earning 70
per cent: 1t has surplus Of over
500 200, 900. has reached the limit Of
Its bond issuing capacity. and could
conservatively increase it's dividend
to per cent.
While directors are always ia he
commended for conservatism In the
management of a company's affairs,
particularly in the preservation Of
Its assets, they must keen faith
with the stockholders who are the
real owners of the enterprise,
These stockholders must accent the
hazards of the dull business ne.
RODS and the risks incidental to the
occasional errors of the managers
On many occasions their dividends
are cut off on such short notice
that they are unable to change to
more profitable investments with.
out heavy loss of principal.
They are entitled to participate
In the benefits of good fortune