Evening star., 1949-02-08
MERRILL ITNcH,
PIERCE, FENNER & BEANIE

This stock generally bears a set divi-
dend rate, say of 81. Holders of pre-
ferred stock get those dividends before
common stockholders get anything -
that's one reason why it is called pre-
ferred' d''-but if the company has a good
year, preferred stockholders don't, as a
rule, get anything more than the speci-
fed 81 dividend per share.
The stock is also called preferred"
because if the company is liquidated.
holders of such stock get first claim
on whatever assets may be left after
creditors claims are satisfied. (Assets
are property. such as plants or goods.
that can be converted into money!
Although preferred stocks differ
widely in the exact terms of the pre-
ferred, treatment which taey provide
owners, they always of0 some prefer.
ences. Hence, the prices Of preferred
stock usually do not huetuate as much
as the prices of common stock over a
given period.
Although preferred stockholders, like
common stockholders, are part owners
Of the company. they often have no
voice in management, no vote in elect
ing directors.
What Are Bonds?
Bonds are kind of promissory note.
People who buy a eompany's bonds
lend their money to that company, and
the company agrees to ny them back
at a set date, known =. the maturity
date. For the use of the money. the
company generally agrees to pay set
rate of interest of, say, go per year.
Bonds are usually backed by mort
gage on the eompany's property OF by
the general credit of the company.
Unlike stockholders, bondholders are
not part owners of the company. They
are creditors of the company.
Of course, as creditors their claims
must be satisfied if the company goes
broke, before stockholders - the owners
- can divide so much as dimes worth
of the oompany's assets - if any.
Because bonds have this prior claim,
they are regarded as the safest kind of
security. That's why they appeal to
conservative investors widows, retired
people, anyone who is willing to take
a smaller return on his money, pro-
vided IFS a surer one
In times of economic uncertainty,
bonds are always comparatively more
attractive than stocks. Their prices do
not huetuate as much as stock prices,
because they bear a fixed rate of interest
and the element of risk is not as imme-
diate factor in the price.
Of course, the price of any bond is
apt to be depressed, especially if there
is any suspicion that the company is
having a hard time.
In addition to corporate bonds, there
are state. city. and government bonds.
On state and city bonds, the revenue
from taxes is frequently pledged as Sc
curity for repayment. Back of u. S.
Government bonds - the highest-grade
investment there is - lies the integrity
of the nation. just that and nothing
more, because nothing else is needed
and nothing could add greater security.
The integrity of the country is the
standard of investment values.
State and city bonds are attractive to
many investors, because the federal
government does not tax the income
from these bonds, as it does the income
from company stocks and bonds or most
u. S. Government bonds.
Bonds are usually issued in $1,000
units sometimes 5000, but as a mat
ter of tradition they are usually quoted
as though the price were percentage
of the face value Thus, if a corporate
bond is said to sell at 9s1z, it actually
sells at 1886.
Government bonds are quoted in
1/32nds. Thus quote Of 100.16 means
100 1882 or in actual dollars, $1,005.
What Are Common Stocks
Worth?
That depends on what people are
willing to pay for them. And what they
are willing to pay for particular stock