Company Notes
By CUSTOS
IT has been a testing time for the stock markets. Substantial profit-taking has been taking place—especially in gold shares— but on the whole this has been very well absorbed and the industrial market could easily move into fresh high ground if there was better political news. The Financial Times index of ordinary shares has risen by over 30 per cent. this year and the average dividend yield is now 4.65 per cent. against 3.67 per cent. on old Consols. This does not point to any technical market danger. The company profits now being reported reflect the great trade recovery of last year and, what is more important, the 7 per cent, increase in national production which has so far been revealed in the official indices this year suggest that current profits may be even better in some industries (but not in all) than in 1953. The market will therefore be paying greater attention to current interim dividends. If they turn out to be better than expected the market advance may be resumed in a strong fashion—assum- ing that the international news is no worse. • A CASE where an interim dividend exceeded the market expectations was INTERNATIONAL COMBUSTION.. I recommended these 5s. shares last February when the dividend had been raised for the year to September, 1953, from 15 per cent. to 20 per cent. They were then quoted at 16s. 9d. They rose nearly 5s, this week to 29s. on the announcement that the interim dividend had been doubled—at 10 per cent. Clearly, this important firm of combustion engineers, specialising in steam- raising plant for power stations, must have plenty of orders ahead to back the directors' confidence. Excluding the heavy EPL, last year's earnings amounted to nearly 67 per cent. It would not be impossible or un- reasonable for the company to pay a larger final, say, 20 per cent. making 30 per cent. for the year. On this assumption the shares at their present price would yield 5.2 per cent. It must not be forgotten that the com- mercial application of nuclear energy— through the medium of steam-raising—is a long term bull point for the boiler industry.
THE Farnborough air show has given a fillip to aircraft shares which they were badly in need of. While American aircraft equities • on Wall Street have enjoyed a rise of over 40 per cent. in not many months ours have been under the influence of the Comet disaster. However, the fact that the VICKERS , 'Viscount,' the BRISTOL 'Britannia,' the ENGLISH ELECTRIC 'Canberra' bomber ha, all gone into full production should give tl lie to the criticism that our aircraft indust is good at designing prototypes but bad bringing them into commercial productio Mr. Sandys, the Minister of Supply, has no said that the Comet enquiry has yield( positive results and that no basic re-desil of the aircraft will be necessary. It believed that a strengthening of the fusela, is mainly involved, so that the cabin ci safely stand the constant changes in pressu to which it is subjected. Writing in Jul last I thought that the cautious invest should leave DE ILAVILLAND alone until (I future of the Comet was known. Until ti company makes a statement on the rest of the enquiry and discloses how badly production has been upset the shares mt still be regarded as speculative, but at 2/ to yield 5.36 per cent, on the last divide] of 71 per cent. (which might even be mai tamed in spite of the expected drop profits) I would not dissuade an invest from buying cautiously. But I would cow this investment with a purchase of HAWK SIDPELEY, as I have recommended in t past. On the indicated dividend of 101 p cent. on the enlarged capital these shares 48s, give a potential yield of 4.4 per cei The earnings yield on the last reported pro/ is the satisfactory one of 17 per cent. . comparison ROLLS ROYCE do not look attractive at 78s. to yield only 3 per cent. dividends and 51 percent. on earnings. they rose 4s. this week on the news of I vertical flight of the Rolls Royce 'flyi saucer.' * • • NEXT month the directors of the BRI GROUP (electrical engineering and die engines) should be considering whetl they pay an interim dividend for the yi ending December. Now that this compa is backed by the Bank of England, wh has put one of its directors on the board, market has great expectations. In the chairman stated that the year closed with an improved trend in both ho and export trade and that this had bl maintained in the first quarter of the ye The 5s. shares have recovered from crisis level of 3s. 9d. this year to 7s. 3d. which the yield is only 4 per cent. on 1 year's dividend of 6 per cent., but as I dividend was covered 3.2 times I think market is justified in looking for an incre In the total distribution, even if the inte announcement is disappointing.
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