Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-08-23
faction OF STOCKS
|FOR WEEK SHO VS.
|MARKET STABILITY
Further Evidence of Sold Out
Condition Given by
Pivotal Issues.
UTILITIES IN SPOTLIGHT
AS TRADING FAVORITES.
Continued Weakness in Commod-
ity Prices Fail to influence
Securities Quotations.
BY CHARLES F. sPEARE.

epecial Dispatch to The Star.
NEW YORK, August 22.--If we look
for the favorable developments in the
business and financial woodland this
Is the obligation Of all analysts at pres
ent--we find them this week in such
incidents as the increase Of 2 per cent
in the steel production of the country;
the declaration of the regular dividend
on American Telephone & Telegraph
stock which benefits nearly 5000
shareholders; equilibrium in the COM
modify index following the check to the
price decline In July; trade and credit
reviews which indicate q fair degree Of
sales and better collections; improve
ment in the oil situation, fundamentally
and speculatively: a constructive report
by the Wiggin Committee on German
debts; and further evidence of COM
pleted liquidation in q stock market that
has demonstrated its ability to ride
along serenely though beset by many
opposing forces.
This Is not spectacular list of events.
1t does, however, afford some encour-
agement when set up against the Toledo
bank failures, the new low prices in
cotton and rubber, suspended dividends
by industrial companies with q long
record for sustained payments, smaller
railroad car loadings and prices for Sec
recent years.
Effect Of Bank Closings.
The substantial stock market reaction
ON Monday was from an average adj
vance Of nine points realized In the
previous week. It reflected the closing
Of several large banks in Toledo and
the effect this had on institutions in
the surrounding territory. These OUT
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the depression to be expected and are
aggravated by the tendency of interior
banks during the boom period TO finance
their local corporations and to carry
the securities resulting from consolida-
tions. Frequently these stocks or bonds
have had no market other than that at
the originating center, consequently
the securities have become frozen"
This has been responsible for the
banking troubles in many sections Of
the United States during the past year
and q half. Where it has not been ex-
posed in actual suspension it has been
suggested In the scores of institutions
that have either omitted or reduced
their dividends since the early part OF
this year. The Federal Reserve Banks
In the affected districts have rendered
splendid service whenever an emergency,
such as that in Toledo. has arisen.
Utilities Maintain Dividends.
Payment of the regular dividend on
American Telephone & Telegraph stock
maintains the position that the pub
lie utilities have gained for their securf-
ties Within recent months the leaders
In the Industrial and railroad field have
lowered their payments to shareholders,
but no important public utility operat-
ing company has yet been compelled 20
do so.
There are an increasing number Of
downward changes In the ranks of the
power and light holding company
stocks. The effect Of q multiplication OF
securities and of pyramids with a mar
row base Is beginning to show. While
railroad mortgage bonds that are now
legal for savings banks and trustees
have been falling at startling rate, the
obligations of public utilities in the legal
and non-legal class have enjoyed normal
market conditions. Not only that, but
the best grades of per cent preferred
shares have exceeded in price that OF
Atchison preferred, which for a long
time had the distinction of selling at
the highest premium of any similar
issue. They have also been quoted at
lower return basis than such long
established investment favorites as
United States Steel and American Can
Gas, United Gas improvement and Pub
lie Service Electric & Gas preferred.
High Yields on Stocks.
There are approximately 500 issues
on the New York Stock Exchange list
out of about 900 traded in from week
to week that are on a cash dividend
basis. The number has diminished rap
Idly this year. OF the 500, nearly $50
pay rates that return the holder of
these shares from to 10 per cent.
There Is no hard and fast rule for reck-
oning the probabilities of dividend
changes from the per cent of yield at
a given price. There are plenty of do
nestle and foreign bonds today, with
apparent immunity from default. on
which the return Is between 6 and 10
per cent. The same is true of real es-
tate bonds In good standing. 1t may be
fair. then, to assume that these $50
stocks selling to return like yield, are
not In great danger of dividend cuts.
An analysis of the individual issues
would indicate that they have for some
time exhibited resistance to general
downward price movements.
When we come to the group of IS
stocks selling from a 10 to is per
cent income basis, we must expect to
find situations that may compel divi-
dend reductions. In this list are a
number Of prominent railroad shares,
such as Baltimore & Ohio, Northern
Pacific and Chicago & Northwestern,
whose payments are likely to be lowered
in the next six months. Going further,
we have about a score Of stocks re-
turning from Is to 20 per cent and OBJ
viously facing smaller rates. Then
there Is the limited list of q dozen
whose yields of from 20 per cent to
over 80 per cent are an assurance that
their dividends will be omitted, though
this may be delayed for some time.
For months Pressed Steel Car and
Shell Unioc. Gil rraterrsd shares had
been quoted at prices which suggested
an immediate passage of dividend Au-
thority for this was given q few days
ago.
Dividend Scale Adjusted.
The conclusion of all this is that
large percentage Of companies whose
shares are listed have already met the
maximum requirements Of the business
situation, either by emitting dividends,
and SO preserving cash resources. or by
reducing them to q level where, with
economies in ether directions, they may
be maintained at pEasent rates indefi-
nitely. IN other words. nrices over
wide naArket area reflect notaonIy conf
cence In the maintenance Oh the cur
rent average dividend scale. bun a COM
pleti0n Of liquidation that Hatkcipated
adjustments in dividends now made.
II q significant that there i1av been
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