Venturers' Corner
It is symptomatic of the state of markets that the first reaction to the announcement of a ro per cent. final dividend by the Indian Iron and Steel Company has been a fall in the shares from 8os. to 72s. 6d. The total dividend, which is being paid in respect of the year ended March 31st last, is 20 per cent., and as the shares are of 15s. denomination, it is readily calculable that the yield is just over 4 per cent. The market adds : And little enough on a speculative share in a company which has only just emerged from a six-year period of acute depression ; the shares are fairly valued. If this were the whole story I should agree, but it is not.
The really important point is that the zo per cent. dividend relates to a year in which the company derived virtually no benefit from the sharp rise in the price of pig iron which set in in 1936. Old contracts showing only a meagre profit have had to be worked off but the order book is now well lined with contracts on higher prices which should be reflected in a very substantial increase in earnings this year. The shortage of pig iron is now one of the significant factors in the world steel situation. With its expanding capacity the Indian Iron and Steel Company is well placed to reap advantage from such conditions, and has already arranged a satisfactory deal with the British Iron and Steel Federation. I shall be surprised if an interim dividend on account of the current financial year, of which six months have now passed, is not forthcoming before December. The prospective earnings and dividends should justify a rise in the shares from today's price. CUSTOS.
[Readers' enquiries, or requests for advice, regarding particular shares will be answered periodically as space permits. Corre- spondents who do not desire their names to appear should append initials or a pseudonym to their questions.]
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