* * * * C.P.R. SHOCK
Dividend forecasting in the case of the Canadian Pacific Railway is a notoriously tricky business. Net operating earn- ings may point to one decision and unpredictable items in the category of other income or the board's view of the general outlook may prompt another. So it has been' this year, much to the discomfiture of the " bulls." Here were net operating earnings for'1939 no less than 7,771,000 dollars, or over 3o per cent. ahead of 1938. Even allowing for an
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FINANCE AND INVESTMENT (Continued from page 230) 800,000 dollars drop in the income from the Consolidated Mining and Smelting investment and a heavier bond service charge arising out of the discount on Canadian dollars in New York, it seemed safe to budget on a really substantial rise in net revenue and a payment of at least 2 per cent. on the preference stock. Instead, the board announces that although there has been " a substantial improvement " in operating results, the uncertainty of the outlook does not warrant any preference payment. Under the impact of this blow C.P.R. preference £ oo stock, which had been lustily bid up to 45, has tumbled to 35 and the 25-dollar common stock has fallen from 71 to 61. What is the prospect?
Despite this official damper, I think it is good. As Canada's war effort gets into its stride this railway must reap the benefit of a larger movement of goods and a growth of public spending power. The increase of 3,888,000 dollars, or nearly 3o per cent., in gross receipts between January ist and February 7th is an indication of what may be expected. Heavier taxation will eat into net earnings, and so will the additional cost of bonded debt in New York, but there should still be a substantial gain in net revenue available for dividends. As lock-up speculations C.P.R. preference and common stock should prove well worth holding.
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