Evening star., 1933-03-25
UTILITIES HOLDING
FIRMS FEEL SLUMP
Many Companies Forced to
Reduce or Suspend Divi.
dend Payments.
Special Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, March 25.-The posi-
ton of the public utility holding COM
pany in the present emergency is a
matter Of concern for a large body of
investors in their common and pre-
ferred stocks. With the earnings of
the operating units decreasing and
taxes increasing. the margin of sur
plus available for the parent COM
panies has been steadily falling. As
a result, each week sees considerable
addition to the list of concerns COM
PEELED to reduce or pass dividends on
both their junior and senior shares.
The momentum Of this movement has
grown since the bank holiday. Last
week there were half a dozen holding
companies that either lowered or
omitted the 6 and 7 per cent d1vl-
dends on their preferred stocks. The
number has been extended this week.
Have Helped Subsidiaries.
For the past six months there are
about 80 instances on record of hold
ing companies that have found them
selves unable to continue former rates
Of dividends on their preferred stocks
and a large group that have omitted
payments on their common stocks. Two
Of the most conspicuous holding COM
panies, from the standpoint of the
number of different classes of pre-
ferred stocks represented in their capt.
tai structure, have suspended all pay
meHts on these issues, which previously
paid to their shareholders $4,000, 900
year.
The criticism of the holding COM
pany has been that it is taking an un-
due portion Of earnings from its op-
Grating units. 1t is one emphasized
by State officials in their proclamations
concerning closer regulations in the
power and light industry. Actually,
however, the situation today is reversed.
for in several notable instances the
holding companies have been COM
PEELED to help out the companies In the
field. This has been responsible for
the policy of conserving cash by cut
ting down or eliminating dividends on
holding company stocks.
The speculative attitude toward pub
lie utility holding company shares has
completely changed since 1929. Then
the common stocks of the prominent
holding companies became the vehicle
for some of the most fragrant of all
of the manipulations on the New York
Stock Exchange and in the Curb Mar
ket. These equity" stocks frequently
sold from so to 10 times their gross
earnings and went to a level averaging
nearly 5000 share. Some of them
did not even pay dividends. These
same common stocks are now quoted at
a few dollars share and their pre-
ferred stocks at approximately one
tenth of their par value of $100 share.
Hostile Public Opinion.
1t is believed that eventually there
must be a recasting of the entire cap
ital structure of a number of these
public utility holding companies. as
their capacity to continue payments of
dividends on their stock and at the
same time maintain interest on a huge
mass of long-term debenture bonds Is
permanently affected by the demand
from all parts of the country for re-
duction in rates of service and the elm
nation of service charges. Unfortu-
nately many of these companies were
organized by promoters who had only
a speculative interest in them. Quite
a few already have folded up, involving
Il lemendous losses by investors in their
securities. Public opinion generally is
hostile to this type of corporation.
which Is regarded as a parasite and
one that takes an indirect toll from
the consumer of all forms Of electrical
energy, as we'll as those of water COM
panies which, in recent years, have
been gradually coming under the in
fluence of the holding companies
For nearly a year after the crisis
developed in 1929 the public utility
companies continued to show excel
lent earnings. 1t was not until toward
the end of 1881 that the effect on
them of the industrial decline became
apparent. Even then the loss in this
direction was Offset by the increase in
the domestic usage. The fall in earn
ings from the high of 1880 amounts to
amount per cent, and, in the amount
of energy generated. to II per cent.
Huge Tax Payments.
Meanwhile there has been steady
increase in the percentage of taxes to
gross earnings. Last year the electric
utilities paid out over $200,000,000 in
taxes. This subtracted 10 cents from
every dollar of gross earnings. The
high tax item is another one Of the
elements that has adversely affected
the position Of the owner of both the
holding and operating company COM
mon and preferred stocks.
Copyright. 1889
The "M-ReRent" diamond was sold