Evening star., 1932-06-26
Market Reflects Doubt on.
Declarations by Directors
of Leading Firms.
LAUSANNE CONFERENCE
WATCHED BY TRADERS
Extreme Dizziness in Security
Transactions May Indicate End
of Long Liquidation.
BY CHARLES F. SPEARE.
Special Dispatch to The Star.

standing features Of the stock market
this week have been its dullness, ar
average daily turnover of a half a mil
lion shares-indicating that it is be-
Gained in sea of troubles-and the
extreme weakness of a handful of the
most representative shares.
Markets that go dead after a long
decline have, in the past, signifled that
liquidation has been completed. While
this seems to be true of a large per-
centage of the active list, the charac-
ter of the selling in such stocks as
Atchison common, American Telephone
g. Telegraph, Allied Chemical, Ameri-
can Can and United States Steel pre-
ferred reflects the fears of holders OF
these shares that current dividends
cannot be supported on the basis of
present earnings.
The dividend factor has been the i'm
portant one lately in coaoTolltrg the
trend of the market. Owing to the
large number of payments made on
July /, the month of June is one In
which the leading dividend policies Of
the year are determined. The cumu-
lative effect Of falling revenues and de-
creasing cash reserves is now weigh
corporations and institutions, as 1t is
also disturbing the minds of investors
who already have had to take a severe
cut in their incomes and fear that
further reductions are in sight.
Important Meeting Pending.
In the long list of dividend changes
this week, some Of the most significant
are those which compelled the omission
of payments on two classes of Ameri-
can Smelling & Refining preferred
stocks, on Brooklyn Manhattan Transit
common, on Electric Power & Light
common and second preferred and on
the stock of the Aetna Life Insurance
Co., with lower rates declared on Pub
lie Service Corporation of New Jersey
common, on Borden Co. capital stock
and on a large number Of bank and
mortgage company shares.
The influence on investment and
speculative sentiment of the dividend
action next week on Atchison common,
in July on United States Steel preferred
and in August on the capital stock of
American Telephone g. Telegraph will
be great.
Conditions in the iron and steel in
dustry are even worse than those III
the field of railroad transportation.
This weeks trade reports indicate pro-
duction at 16 per cent of capacity. 1t
is well known that none of the iron
and steel companies has been making
a profit in the current quarter and that
ali of them will show substantial def
cts for the period. They did, however,
experience an era of abnormal net re-
turns for many years prior to 1881.
AS late as the end of last December,
the United States Steel Corporation
showed in its balance sheet cash and
marketable securities of $4,000 600.
So large were the profits of this con-
Germ that during the good times it dis
tributed per cent and per cent cash
dividends to its common stockholders,
in addition to stock dividends, with the
preferred shareholders having no bene-
fit from this prosperity except through
a substantial reduction in the fixed
charges ahead Of their security.
In spite of what the tape appears to
suggest. it is believed that the Executive
Committee of the United States Steel
Corporation next month will take these
facts into consideration and will order
the regularly quarterly payment on the
senior shares.
Telephones Dividend Policy.
The case of the American Telephone
& Telegraph Co. is different from either
that of the Atchison Railroad or the
United States Steel Corporation. II
has had liberal dividend policy which
has been supplemented by its biennial
offering of new stock to shareholders
at par, so that the average annual
amount Of dividend and rights" COM
puted on a basis of the lowest price for
the rights" was over Sl4 a share from
1926 to 1880. inclusive. In the last six
and one-half years, which includes the
first six months of 1882, this corpora
tion has shown a surplus of s220,000
900 above its dividend payments. This
is approximately the amount which II
has in hand today Of cash and quickly
marketable securities. It also has 675,-
600 shareholders, of whom 125,000 are
its own employees and of whom many
are still paying installments which per-
nit them to take up the stock at about
double its present price.
Under the current stress in business
conditions, and owing to the fact that
the SO share dividend is not beine
earned, it would be conservative fol
the American Telephone & Telegraph
directors to reduce the rate to SO 6
share or slightly more in percentag;
than they have cut the salaries cf theil
employees. Beyond such an adjustment
and in view Of a remarkable cash pCsi.
ton, it does not appear reasonable Il
expect them to go at this time. They
are not faced by large maturing obliga-
tions or by commitments to complete
an expansion program in a period wher
there is already an excess Of facilities
A rate of 8 per cent is one which tbs
courts some years ago established a,
legitimate for a public utility corpora
ton to earn on its property investment
Factors in Reductions.
The general dividend situation today
contains features that have never be-
fore faced those whose responsibility il
is to see that the stockholder receive:
his Just due, but at the same time look.
ing to security for bank depositors anc
to certain legal requirements which pre-.
vent the payment of dividends though
earned. The Brooklyn Manhattan
Transit dividend was passed this week
not because Of failure to cover it from
transit receipts but in order to cu'
down the amount of maturing loan
Numerous investment trusts and pub.
lie utility holding companies have de.
ferred payments as their assets anC
liabilities went out of balance. Bank
that have earned their regular dividend
requirements from ordinary banking
transactions have not considered it iT
the interest of their depositors to con.
tinue payments on the former scale
when the depreciation in their secur.
tiles was in excess Of their undivided
profits and surplus.
There have. been encouraging as wei
&C diSrottra ping develnnr1avfS ar III,