Evening star. [volume] (Washington, D.C.) 1854-1972, 1925-12-31
Some Good Stock Yields.

Some Good Stock Yields.
In the matter of railway common
stocks many of these issues. such as
for example. the Atchison. have long
been prime fayorites with investors
il anything, their status has improved
during the past II months Earnings
have been higher, the political outlook
IS better and directors are conquer
ing the tinidity which in years past
has prevented them from rcCOgniz-
ing the rights of shareholders to Il
reasonable division of profits. The
problem is to determine how much
Of all this has been discounted in the
market price. and this IS the same
problem which in greater or less de
gree Is involved in the buying OF any
common stocks whatever. In tho
active speculation of the past II
months there has been less of extrav-
agance in railway stocks than in in
dustriaIs. but the principle is the
same.
Reference has been made to the
current popularity of the theory that
common stocks are fully desirable in
Eestments as bonds. In this connec-
ton 1t deserves some analysis. In the
/ first place, the advantage claimed is
that the buyer of common stocks is
protected from a depreciating dollar.
The bond holder has no such protec-
ton. He Is entitled to the coupon
rate of his bond and no more whether
the cost OF living goes up or goes
down. Every one recognizes that the
investor who bought Il West share
20 years ago has lost heavily III the
/ purchasing power Of his income, al
though the investment rating Of his
bond is just as high as ever and the
. = t.l az,
same. on the other hand. dividends
/ 10 stockholders may he raised, and
+ generally are if the corporation is
prosperous as the level Of commodity
prices advances.
Price Due to Drop.
The first question then is whether
IN" fall in the buying power Of the
dollar, which has been in progress
with Interruptions ever since 1896, Is
10 continue indefinitely That it will
so continue Is a large assumption, to
say the least. Space does not permit
examination of all the factors that go
10 make up the price trend over the
series OF years. Suffice it to say that
history teaches that after great wars
there has always come d period of
falling prices. If precedent is to be
followed in these times. one of the
arguments for investment i'll common
stocks is certainly weakened.
Another phase of this discussion
about stock investments is that safety
depends absolutely on wide diversified
/ ton No one is enough of q financial
/ wizard to be able to make u l00-per-
cent selection of corporations with an
+ assured future for even Il decade to
come. That IS admitted by the pro
Donents of the theory. but they say
/ that the failures in one or two in
+ stances will be more than made UP
by success in the balance. 1t follows.
then, that an investor must have the
means to spread out his risk over a
+ large number of securities. There Is
/ no substitute for this precautionary
diversihcation.
! Guessing at Essentials"
/ Next it is urged that the shares
! of essential industries are the only
I ones suitable for this kind Of a COM
mon stock investment list. But who
! can define an "essentiaf' industry ?
J Is the trolley car essential? 1t would
/ have been so regarded ten years ago,
! but the motor bus and the private
automobile create doubts now. Or Is
| the moto,. car itself an essential? 1t
! would not have been SO classified ten