A HIGH YIELD
So far as Cable and Wireless (Holdings) is concerned, the gross receipts from the operating company would appear to be reduced from Li,o5o,000 to L890,500, or by £159,500. In practice the income from the operating company passes to the holding company by a tortuous route. The capital of the operating combine is held by the " old " cable com- panies, and these, in turn, pass on their dividend income to
(Continued on page 65o)
FINANCE AND INVESTMENT
(Continued from page 648) the holding concern. In reaching the figure of £159,500 as the indicated reduction in the amount transferred for 1938 I have assumed that the old cable companies have again fully distributed their income, and I have also allowed for the fact that 8.67 per cent. of the operating company's dividend now goes to the Government, which holds that percentage of the equity.
How, then, has Cable and Wireless (Holdings) managed to maintain the 4 per cent. rate on its own highly-geared ordi- nary stock? It may be, as I have hinted, that the full accounts will show that the carry-forward, which is ample for the purpose, has been substantially reduced. Even this seems doubtful, however, in the light of the increased divi- dend just announced by Marconi's Wireless Telegraph, the manufacturing concern. This company has not merely raised its 1938 dividend from 9 to 12 per cent., but has declared a 3 per cent. tax free bonus. This implies an additional £145,000 for Cable and Wireless (Holdings) which goes far to offset the reduction in income from the operating company. At 43, Cable Ordinary £100 stock is still quoted to include the 4 per cent. dividend. Ex the dividend the price is reduced to 40, at which the yield is a full to per cent. At 84 the 51 per cent. cumulative preference stock yields over 61 per cent. I would not sell either stock at these depressed levels.
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