Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-03-21
PREFERRED STOCKS
GAINING IN FAVOR
Public Attitude Toward Sc
Nor Equity Shares Has
Undergone Change:
BY CHARLES F. spEARE.

special dispatch to The Star
NEW YORK, March 21-The buyer
for large investment trust, along with
many other dealers in securities, de-
cided in 1929 that they would liquidate
all of their holdings Of preferred stocks
and carry nothing but common stocks.
Their argument was a preferred stock
had neither the security Of a bond nor
the speculative possibilities Of a con-
mon stock. In other words, 1t was a
misft in the investment world and not
entitled to a great deal of consideration.
The sequel was that they sold their
preferred stocks and bought common
stocks. In view of their experience
they are today again investigating the
merits Of preferred shares. If they had
kept the latter during the past two
years they would have suffered COM
paratively little shrinkage in income
and only moderate amount of depre-
citation in the principal of their in
vestment. There would have been times
when their preferred stocks would have
sold much below the purchase prices,
especially if they had been taken as
new issues in the last few years and
brought out in a majority of cases
around par.
Recent Movements.
While the preferreds rallied vigorous
ly from the low levels of November
1929, they went even lower in the De-
cember break last year than they had
been the year previous. Today, how
ever, many Of them are back to ap-
proximately their high quotations of q
year ago, and in the last few weeks
have shown a better average perfor-
nance than many domestic corporation
bonds.
There are listed on the New York
Stock Exchange approximately lis ,000,-
600 shares of preferred stocks, or only
about one-tenth as many as there are
of common stock shares. Last month
the average price Of preferred stocks
was slightly over $66 share against
$3.50 for common stocks. The high
est proportion Of preferred shares listed
are those of the public utilities, which
represent about 20 per cent of all pre-
ferredS, and next, those of the railroads.
It is in the public utility group, how
ever, that most of the turnover from
day to day takes place with a market
for these shares on the New York curb
and over the-counter" Of even greater
size than on the New York Stock Ex-
change.
Position Of Stocks.
Frequently, and especially among in
duStrial companies, the preferred stock
is the senior issue in the capital struc-
ture. This is true in the case OF Cen
eral Motors, whose per cent preferred
issued last year to replace the old z
per cent preferred, has just sold above
101. With nearly all of its bonds re-
tired, the per cent preferred stock
of the United States Steel Corpora
ton is, in effect. its senior security.
The longest established of the per
cent induStrialS, as an illustration Ma
tiona1 Biscuit per cent preferred, are
now quoted to yield from 5 per cent
down to AZ per cent, or less than most
Of the high-grade industrial mortgage
bonds.
preferred shares this week has brought
some Of them above their call prices.
This duplicates the situation of two
years ago when it was expected that
| these shares would be refunded into
others bearing lower dividend rate.
Among stocks of this type are North
| American Edison per cent preferred
and Public Service Electric & Gas of
New Jersey per cent preferred. Co
lumbia Gas & Electric has this week
been within u point of its call price of
10 and Electric Bond & Share per
cent preferred, regarded by many as the
premier issue of its kind, has been
working toward its call figure.
Investors Attitude Changes.
Altogether the attitude of investors
toward preferred stocks has undergone
decided change at time when they
are concerned not only with the COM
paratiYely high average return on pub
lie utility preferred shares, but with
the element of safety which they pre-
sent to the buyer of them. Accord
ingly, it Is expected that with pre-
ferred shares at their present level
there will be more inducement to fl
nance with this type of security. Con-
solidated Gas of New York is soon to
lead the way with a large new issue
Of per cent senior stock.
Copyright, 1881