Evening star., 1926-11-02
MEN AND MONEY
By NJ. S. Ruke,ser
(Copyright. 1926.D

gregate will have earned more In the
year ending December 81, next, than
| in any corresponding year In the MIS-
tory Of transportation.
On the basis of present reports. 1t
| Is likely that the 1911 class l railroads
| OF the country will report net in
| come for the year of 81 200 ,00O,0O
new high record. OF course, in 1916,
the previous highwater mark Tor rail-
| road prosperity, the railroads showed
a percentage return on capital IN
vested, having in the last decade sub
stantially increased their property In
Vestment account.
Railroad earning power in 1927 will,
of course. depend somewhat on gen.
| eral business conditions, but, even
If there should be recession in the
volume Of trade, the prospects for the
railroads are good. If and when pres
ent prosperity should be superseded
by less favorable economic conditions.
| 1t is inevitable that there should arise
again clamor for lower freight and
passenger rates. But, even IL the In
terstate Commerce Commission should
under certain contingencies see f1t to
heed such a demand, there will un-
questionably be a lag. during which
time the railroads will reap benefits. In
times Of prosperity and rising prices,
the slowness Of public regulatory
bodies in meeting changing economic
conditions works the other way
against the interest of public utility
companies.
Commodity Prices Down.
At present. despite the eXtraor-
dinary volume of business activity in
the United States, average commodity
prices are nearly 10 points lower than
year ago. That is an unusual de-
velopment. Ordinarily, commodity
prices have risen in the United
states during periods of prosperity.
The factor of falling prices raises diff
ficult problems in management of In
dustrial corporations. but does not af-
feet the railroads adversely. AS a
matter OF fact. as long as freight and
passenger rates stay up, falling prices
for materials and supplies result in
substantial savings for the railroads,
winch show up In improved net earn
ings.
Another extremely important factor
TO he considered in foreca sting rail-
road earnings next year will be the
factor of possible declines In main
tenance charges and other expenses,
which have been abnormally heavy
since the return OF the railroads after
the war to private management. To
a large extent, the rehabilitation pro-
gram has been completed and charges
should in some instances be cut down.
In the last decade, the percentage Of
economic growth has been more rapid
IN the South than in any other part
OF the country. The current depres-
sion in cotton may temporarily check
the progress of the South, but is only
a short-term factor.
Pennsy's Dividend Boost.
1t seems unreasonable to look upon
the raising of the Pennsylvania divi-
dend from to per cent as the last
chapter in the story of railroad de.
velopment
Strong railroads, which are already
paying Z per cent or more, may hesi-
tate for political reasons to boost the
regular dividend. An alternative is the
system of the Norfolk and Western,
which has declared a per cent extra
dividend. OF course, the Norfolk and
western and other roads passing
through the soft coal territory, like
the Chesapeake and Ohio, have in
tne last two or three years been sub
Ject to abnormally favorable condi-
tlonS. The domestic anthracite coal
strike and the current coal strike in
England have resulted in exception
ally large coal movements from the
districts which these railroads serve.
Another manner in which prosper.
Gus railroads will pass along the
gains to stockholders will be
through melon cutting-the declara
ton of stock dividends. From the
standpoint of cold logic, a stock divi-
dend seems to be much ado about
nothing. 1t is analogous to exchang.
ing dime for two nickels, but 1t fire.
quently paves the way for increa sing
cash dividends. For example, a rail.
road might hesitate for political rea-
sons to increase it's common stock
dividend rate from 6 to II per cent.
Instead it declares 100 per cent stock
dividend, giving its shareholders one
additional share of stock for each one
which they own. Then the corpora
ton unostentatiously places the new
stock on per cent basis.
That this psychological factor is the
motive behind stock dividend in MANY
instances is not to be questioned. 1t
may seem childish, but corporation ex-
ecutiVes see advantages in not having
their shares sell too high or in not