RAIL PRIOR CHARGE YIELDS If all is set fair for
fixed interest securities, why this con- tinued sagging of home rail prior charges ? Here is a picture of the present position :—
Current Highest Yield. Current Price Price. 1937. s. d.
L.M.S. 4 p.c. First Pref. .. • • 791 921 5 2 0 L.M.S. 4 p.c. 1923 Pref. .. .. 67 821 6 2 0 L.N.E.R. 4 p.c. First Pref. .. 66 793: 6 3 6 In each case the decline from last year's top prices is very considerable, disconcertingly so in the light of the com- parative firmness of prices of fixed-interest stocks generally. The only explanation I can suggest, which finds confirmation in the market's experience, is that these preferences, and more particularly the first ;I:tree, were purchased on a sub- stantial scale as speculative counters for their capital apprecia- tive chances in the recovery movement of 1935-36. Not being firmly held for genuine investment purposes, they have inevitably been subject to desultory liquidation in the recent market decline.
On all the known facts they are now under-valued and should prove, satisfactory investments for those seeking a fairly high rate of income and reasonably strong cover. Within the next few days we shall know how the railways fared in the matter of net revenue in 1937, but meantime one may safely assume that, in face of a heavy increase in expendi- ture, all four companies succeeded in raising their earnings. This means that the cover behind the preference dividends, already quite substantial in relation to current yields, has been strengthened. This year, although I do not look for any further important rise in the railways' net revenues, I anticipate that the ground gained in 1937 will be well held.
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