Evening star., 1937-12-17
A. 7. &T.DN|DEND
POLICY STUDIED
Rate Not Expected to Rise
Above 9 Per Cent as
Position improves.
BY CHARLES F. SPEARE.
|pecial Dispatch to The Star.

Special Dispatch to The Star.
NEW YORK, Dec 17-Interest has
been centering recently in circulars of
Wall Street houses, and now in series
of articles by Barrons and other finan-
cial papers, in which the dividend out
look OF the American Telephone g.
Telegraph Co., its rate and public re-
lations problems are discussed. In
asmuch as the company paid per
cent to its 650,000 shareholders with
out interruption during the lean years,
1888 to 1885, inclusive, the topic is q
live one.
In the 1933-35 period, the company
did not earn its dividend. Total def
cits after dividends in those three
years amounted to~$11S, 100000. At
each dividend date there was fear that
the rate would be reduced. The drop
in the price Of the stock seemed to
suggest 1t, for, from $40 In 1929, it
had fallen to about 10 in 1882, or 30
per cent, about the average deprecia-
ton in many prominent listed shares.
At that time, Walter S. Clifford, presi-
dent OF American Telephone g. Tele-
graph, told this writer that he believed
the corporation had a moral RESPONSE
bility to its shareholders to maintain
the per cent rate even though this
meant a heavy annual draft on its
surplus.
Turn Came In 1886.
The turn in income came in 1895.
when surplus of s6,745, 900 over divi-
dend requirements was earned. In the
first nine months Of this year, the sur
plus amounted to IS 5,642,OO0. For the
IL months it is estimated that the
company will show over $40 a share on
its capital stock. The refunding of a
large amount of per cent bonds into
those bearing rate of 314 per cent
has added substantial amount to net
income applicable to 1897 dividend
payments.
After its break to about 70, "Tel
and Tel" stock rose to 100 in 1886.
and, early this year, sold at 1877. For
weeks 1t has been wavering within a
radius OF 10 points, each way, from
$50, figure at which the stock yields
the per cent income SO attractive
to investors. Many holders of 1t have
been prepared for a cut in the div
ldend, but with an offset in the form
of rights" to subscribe to new stock
which would compensate for a reduc-
ton to, say, per cent. 1t might be
stated that, during the 1933-1935 Pc
riod, the company's cash and liquid
investment account held at an aver
age of s200,000,000 in spite of the
deficit of $4,000, 900, and was $780,
100000 in 1886, the latest official figure
given. From the point of view of cur
rent earnings and available surplus,
plus the greatly reduced carrying
charge on its bonds, "Tel and Tel" is
in a much stronger position to con-
tinue its per cent dividend than at
any time since 1929.
Other Factors Cited.
There are questions of policy, how
ever, that may determine what div
idend is declared in the future quite
as much as the condition of the in
come account and the balance sheet.
A per cent dividend by a corpora
ton subject to Federal and State reg
ulation, whether it be a railroad or a
public utility, is mark for regulators
to shoot at.
1t is only because the American
Telephone & Telegraph Co. has
been so clean in its financing, so ef-
ficient in its operation, and so much
of an institution" of which Ameri-
cans are proud, that it has escaped
much of the travail to which other
public utilities have been subjected.
There are, however, constant demands
on it by groups of patrons insisting on
lower rates, primarily for local and
short distance tolls.
Obviously, the dividend Of per cent
on "Tel and TEL" paid for the past
Is years, can never be above that
rate. Therefore, the element of spec
ulation on the bull side, predicted on
more profit sharing, has been taken
out of the stock
(Copyright, 1877