Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-03-08
Holders of Securities Dis
couraged by UnfavorabIe
Trade Reports.
POLITICAL EVENTS HELD
STIMULANT TO BUSINESS
Observers Believe Near Flu
ture Will Show Gradual
Upturn.
BY. CHARLES F. SPEARE.

mentS this week which promised most
to business were political in their ma
ture. The American Congress adj
journed for nine months. France and
Italy arrived at satisfactory agree
ment as to their relative naval strength.
| A truce was reached between the Brit
ish government and the Indian Nation
aliSt party. Out of these foreign Incl
dents has come a greater respect for
European dollar loans. 1t is probable
that within short time there will be
another great loan to Italy sponsored
by French and American bankers.
1t was the better aspect of conditions
abroad that helped to offset the new
wave of pessimism that swept over Wall
Street during the week and erased
about IS per cent of the average gains
in stocks in January and February,
when the appreciation in values of
listed shares exceeded $4,000, 900 900.
The market had been overplaying the
improvement in business and specu-
lative sentiment. 1t had underestimate
the effect on holders of industrial and
railroad securities of the kind of earn
ings and the number of dividend de-
creaSes appearing in the financial news
from day to day.
From the surveys that have been COM
pleted 1t appears that corporation earn
ingS in 1880 were about 40 per cent
under those of 1929 and % per cent
smaller than in 1928. This is bad
! enough, but the troubles did not end
with 1880. They are continuing into
1881, so much so that it is expected
losses in the present quarter of the
year will be equal to, If not greater
than, those in the final three months
of last year. The net operating income
of the railroads in January was of over
81 per cent, approximating the greatest
loss in any one month in 1880. Car
loadingS for February indicate that the
returns for that month will not be
much better.
What we are now getting is the ef-
feet Of nearly year and half Of de-
Ginning corporation profits. The num-
Der OF business failures last month was
the greatest for February on record.
The extent of the March dividend re-
auctions surpasseS February and Janu-
airy and affects companies Of more
prominence and higher credit than
those heretofore mentioned. In this
weeks list Of corporations that have
found 1t advisable to conserve their
cash resources" are the Lehigh Valley,
Rock Island and st. Louis-San Fran
cisco Railroads, youngstown Sheet g.
Tube, American Rolling Mills, Chicago
Pneumatic Tool, Niles-Dement- Pond
| and General American Tank Car, South
Porto Rico Sugar, Remington Rand,
Postal Telegraph g. Gable Co, Magma
Copper. Hecla Mining, the New Haven
| Clock Co., Phillips Petroleum and the
United Carbon Co.
! Nearly all of these concerns have in
the past shown a substantial margin
| Of earnings over their dividends. The
| payments to shareholders in the
| Standard Oil group in the current
quarter will be $4,700,000 less than in
the same period year ago. If oil trade
conditions do not materially improve,
| the total distributed in the June quar-
ter VIII be smaller than that now being
! paid.
! 1t is obvious that the railroads cannot
| much longer go on paying dividends
from surplus when the outlook for COW
ering these dividends from operations
is so unsatisfactory. There remains only
a small group of carriers that are able
| to meet dividend requirements without
drawing on the revenues of other years
or the balances of weather. subsidi-
aries. The seriousness of the situation
is indicated in the action of the ST.
Louis-San Francisco directors in en-
tirely passing their 8 per cent dividend
| on the common stock when the most
that had been expected was that the
rate would be halVed.
! There were few who anticipated q
downward revision of the Lehigh VAL
ley Railroad dividend. Consequently
Wall street is preparing itself for other
important reductions and will not be
surprised If the rate on New York Cen
tral stock is reduced next Wednesday
inasmuch as earnings of the road this
quarter will not much more than cover
fxed charges, in spite of the fact that
operating conditions have been favor
able.
Decline in Rail Stocks.
II it is admitted that there must be
many. more dividend reductions before
complete adjustment is made to the
long and severe fall in profits, the
| question for the investor or Speculator
to decide is whether a smaller income
return has been discounted in present
! prices or was overdiscounted in the
level Of quotations established three
months ago. Not few of the stocks
on which dividends had been omitted OF
lowered have advanced following such
action. Faced with the worst operat-
Ing returns during the present genera
ton, railroad stocks have declined very
little in proportion to the advance that
took place in them between the middle
OF December and the third week in
February.
There is confident feeling that bust
ness Is on the mend ard that, although
1t viii be some months before many
corporations get "out of the red" it is
no time to liquidate securities that have
been carried through the last half year
This is expressed in another way in the
amount of cash buying going on from
week to week and the eagernesS with
which the public returns to the mar
ket after few days Of sustained lead
ership In popular shares.
Copyright, 1919