COMPANY NOTES
By CUSTOS
THE weakness in the gilt-edged market and the alarms from Formosa contrived to bring the bull movement on the Stock Exchange to a halt this week, but what brokers call 'the undertone' remained firm. And markets were not without their good features. The surprise was the high opening price for the premium on COL- VILLES. From 2s. 3d. it rose quickly to 3s., and as I write is stabilised around 2s. 6d. The dividend yield on this and on UNITED STEEL and LANCASHIRE STEEL is around 6.7 per cent., which compares with an average yield of 4.4 per cent, on other in- dustrial equities. In other words, the political risk premium is rated on the Stock Exchange at about 21 per cent. If the by-elections continue to favour 'the Conservatives I would expect steel shares to go on quietly improving in market price. It is a pity that the Labour Party cannot hedge against the risk of an electoral defeat by investing its election fund in steel shares. Oil shares did not respond as much as I expected to the war scare and the rise in petrol and diesel oil prices. The sug- gestion in one of the Sunday papers that the oil combines rig prices and profiteer may possibly influence the market, which is always fearful of investigations by the Monopolies Commission. A reader re- minds me that ROYAL DUTCH-SHELL only distributed last year one-fifth of the earn- ings available for the equity of this group. One would not have thought that they were in need of higher prices at the petrol pumps. For the investor, SHELL, B.P. and BURMAH OIL shares seem more desirable than ever.
The Transport Commission's plan to spend £1,200 million on British Railways over the next fifteen years caused an im- mediate rise in the shares of the manu- facturing companies likely to benefit. The two electrical giants—ENGLISH ELECTRIC and ASSOCIATED ELECTRIC—are mostly con- cerned, and as their dividends were covered by last year's earnings 24 and 3 times respectively, the investor should be con- tent with the current low dividend yields. English Electric directors have now dis- closed their intentions about the final dividend.. It is to be 81 per cent., raising the year's total from the equivalent of 91 per cent. to 121 per cent. The shares at 61s. 6d. would therefore yield 41 per cent. Associated will probably pay more than the equivalent 14 per cent., so that the yield at 71s. will probably better that on EngliSh. WESTINGHOUSE BRAKE touched 1O2. 6d. and came back to 97s., at which price the yield is 31 per cent, on dividends of 18 per cent. covered 3.3 times by last year's earnifts. RUSTON AND HORNSBY, manufacturers of diesel engines, gas tur- bines, etc., offer a higher dividend yield and a stronger earnings cover. Their trad- ing year ends in March and the dividend will not be declared till June. Last year they paid 121 per cent, and earned nearly 52 per cent. against 541 per cent. in thp previous year. Earnings fell slightly be- cause higher costs were not passed on to the consumer in view of the keener com- petition in the export trade. The company is predominantly an exporter but the new railway plans will add a broader base to its business. The shares rose this week to 59s., so that the dividend yielc' is now 4.2 per cent. and the earnings' yield 171 per cent. The dividend might well be in- creased, having been covered last year oVer 4 times. In these uncertain markets it is -always wise to keep to the shares with high earnings' yields. Ruston and Hornsby not only satisfies that investment test but offers a good assets' value as well. Net tangible assets according to the last balance sheet were equivalent to about 57s. per share. If I were to make a selection of three companies among the many .bene- ficiaries of the railways' capital programme I would pick English and Associated Elec.
• tric and Ruston and Hornsby.
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