FINANCE AND INVESTMENT
By CUSTOS
THERE is no disputing the trend in the stock markets. So long as the war news remains only moderately discouraging weight of money will call the tune and prices will tend to move up. This is true as a general proposition. Naturally, there will be some casualties and some star performers, though the latter seem likely to outnumber the former. Home rail stocks are still under-valued and many depressed preference shares with arrears of dividend have plenty of scope for recovery.
COURTAULDS AWARD
Sooner than most of us expected the arbitrators in the Courtaulds case have made their award. Against the £13,60o,000 for which the American Viscose asset was actually sold in New York last year, the award is £27,125,000, or much nearer to the £32,000,000 valua- tion placed on this asset by the Courtaulds board. In my view, the decision is a fair one, although it is bound to arouse a good deal of criticism from those who argue that nobody should expect fair treatment in time of war. As expected, the company will not make any distribution to its stockholders out of this large sum during the war period. The £27,125,000 is to go into Government securities and will be available, of course, for the re-establishment of the company's overseas connexions and " to provide for major develop- ments at home and abroad." Courtaulds Li ordinary units have risen to 38s. 3d. They are well worth holding.
CUNARD DEVELOPMENTS
It is good to see the views expressed here in recent months about Cunard Steam Ship ordinary stock endorsed by the course of events. At last we have the full figures for 1941 of Cunard White Star which were required to complete the picture, and very encou- raging they are. Net profit of this giant operating company, which owns the ' Queen Elizabeth' and the ' Queen Mary,' and of whose Lio,000,000 of capital 62 per cent. is held by Cunard Steam, amounted last year to £950,927. This was struck after providing £1,149,110 for depreciation. With a further payment of 24- per cent. the total distribution for 1941 has been brought up to 7f per cent., and I see no reason why at least this rate of dividend should not be maintained. Available earnings were equivalent to 19f per cent.
Applying these figures to the position of Cunard Steam Ship, in which the investing public is directly interested, I estimate that there should be earnings of over zo per cent. on Cunard Steam Ship ordinary stock. Before dividends can be paid arrears on the second preference capital, involving a net sum of £330,000, must be cleared off, but Sir Percy Bates has already foreshadowed that this task will be accomplished by the end of this year. On the strength of the Cunard White Star results, the Steam Ship Company's Li ordinary units have risen to 16s. 9d. I still feel that they should not be sold.
RICHARD THOMAS RECOVERY
In advance of the full accounts it would be foolish to draw many firm conclusions from the dividend announcement of Richard Thomas and Company. One feels certain, however, that a board as conservative as the one now controlled, in the last resort, by the Bank of England, would not have resumed ordinary dividend pay- ments without being convinced that they can be maintained, at any rate for the war period. As even 31- per cent. on the ordinary would have meant To per cent. on the preference and ordinary shareholders actually get 5 per cent., the maximum preference divi- dend is comfortably covered. My feeling is that the 6s. 8d. ordinaries around par may now be looked on as a good lock-up. At 29s. 9d. the preference, yielding over 6 per cent., are obviously under-valued. They are a sound investment both for yield and capital appreciation.
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