COMPANY NOTES
By CUSTOS
FOR the past month I have been advising investors not to plunge into low-yielding industrial shares which seemed to me too high and I hope that some of my readers have been able to watch the present market `slide'—the new term for slump—fortified by having accumulated some cash at the bank. The correction was overdue and al- though it has been sharp, indicating that many speculators have been caught out buying shares on borrowed money, it has up to the time of writing been no more severe than was anticipated by the profes- sionals. In fact, a 10 per cent. fall in a bull market is a normal event. A rally is now to be expected, but I do not expect the up- ward movement to go far. A period of consolidation is required' which may well last up to the Budget. One of the worst hit in the 'slide' has been the market in oil shares. While a huge 'bull' position was being liquidated the news broke that the United Nations had published a paper on 'The Price of Oil in Western Europe' which accused the international oil combines of rigging prices. It is common knowledge that oil from the Middle East is always sold at American Gulf prices, although it could be cut by half and still make a handsome profit. It is not likely to be cut because the agreements with Persia and the sheiks of the Persian Gulf are on the basis of Ameri- can Gulf prices. All this helps to explain why SHELL and BRITISH PETROLEUM are such good dividend earners. As compared with an index fall of under 10 per cent. Shell dropped 13 per cent. and British Petroleum 18 per cent. A,rally here is under way as I write.
ously recommended is INTERNATIONAL COMBUSTION, which has come back to 25s. from a high level of 30s. 3d. The year's distribution has been raised to 25 per cent. against 20 per cent. covered by earnings of 50 per cent. The current yield is 5 per cent. The company has subsidiaries in the Dominions and as it designs and manufac- tures capital goods such as mechanical stokers, steam boilers and mining machin- ery its overseas trade should be expanding.
• • • BRITISH AMERICAN TOBACCO helped to en- courage a rally on Wednesday by produc- ing higher profits, paying a higher dividend (15 per cent. tax free) and declaring at the same time a higher interim dividend. The shares improved to 52s. and if we can assume 173 per cent. tax free for next year the dividend yield would be £5 18s. 6d. per cent. gross. As tobacco shares did not par- ticipate much in the speculative boom they are still around their high leveli of the year. But dividend yields are well above the average. For the long term 1 prefer BA I to IMPERIAL in spite of the 6.9 per cent. yield of the latter.
ERICSSON TELEPHONE are due to declare their final dividend early next month. After the 100 per cent. scrip bonus a year ago the interim dividend was reduced to only 4 per cent. tax free against 5 per cent. tax free and it looks as if the year's distribution will be 20 per cent. against a total of 25 per cent. tax free previously. Here is a case where the fall from the high level of 35s. 9d. has been moderate, the present price of 31s. 3d. affording a potential yield of 53 per cent. gross, assuming that the market estimate of dividend is correct. ALDERS (TAMWORTH), manufacturers of special papers, Kraft wrapping paper and corru- gated board, were recommended in July last when the 2s. shares were 8s. 3d. They are now quoted at 10s. 3d. to yield 51 per cent. on dividends of 27i per cent. covered by earnings around 60 per cent. The results for the year ended October last were ex- cellent, profits being very nearly doubled and a one-for-two bonus 'is to be dis- tributed. A. E. REED have fallen from 87s. 6d. to 75s., at which price the yield on the esti- mated dividend may be nearly 5 per cent.
Previous page
