FROM THE ARCHIVES:A year on from the Wall Street crash and the beginning of the Great Depression, The Irish Times's anonymous financial correspondent reported from London on the state of the stock market and tried to make recommendations based, as usual with such recommendations, on what appeared logical and plausible at the time. – JOE JOYCE
The world generally is much poorer than it was a year or two ago, and one section – shareholders in trading and manufacturing companies – is suffering through the smaller distributions now being announced.
These reductions are inevitable owing to the long continuance of trade depression.
Investors with such interests, therefore, must be reconciled not only to depreciation in the market value of their shares, but also to a smaller annual income, or it may be no income at all, in the shape of dividends.
Almost every day there is a fresh disappointment, though really the announcements should not be regarded as unexpected.
Following the postponement of the interim dividend by Guest, Keen and Co., the reduction in the P. and O. rate and the heavy fall in Wallpaper Manufacturers’ profits, we now have a severe cut in the Tate and Lyle dividend, pointing to a drop of nearly £400,000 in the year’s profits.
In these circumstances, it is not surprising that the public hold aloof from the miscellaneous market. It would be different if there were clear indications of better times ahead, for then diminished profits and dividends would be regarded as a thing of the past.
Unfortunately, it is difficult to see any signs of a real recovery, and it is to be feared that for some time to come the reports of Industrial companies will reflect the continuance of trade depression.
Because of this unsatisfactory state of affairs, many investors confine their purchases to what they regard as absolutely safe shares, and are content with the quite moderate immediate return that can be obtained from the best Industrial Debentures, and shares in the great English banks and insurance companies.
What might be described as a good medium class of investment is Southern Railway Preferred Ordinary. The present price is about 67, at which the yield is 7 per cent., an excellent return for an investment security. Last year, after making the payment, there was a substantial margin of revenue left .
This amount would have to disappear entirely before the dividend prospects of Southern Preferred were jeopardised.
A point in favour of the stock is that the Southern is less affected by trade depression than the London, Midland and Scottish or the London and North-Eastern, while it is considered that prospective developments of the Southampton Docks will lead to an increase in revenue.
The effects of road transport competition are scarcely likely to be greater in future than in the past owing to the acquisition of interests in such undertakings by the railway companies.
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