CABLE AND WIRELESS
Lord Pender's survey at the meeting of Cable and Wireless (Holding) tells us a little more about the "New Deal" between the combine and the Government, but does not alter my view that the immediate outlook for stockholders is not very encouraging. At this stage the question whether the ordinary dividend is likely to exceed 4 per cent. may seem rather academic' but Lord Pender rightly examined the possibilities in the light of the new "standard revenue" arrangements. His conclusion was mildly reassuring. On the assumption that the £1,200,000 standard revenue of the operating company is attained, he calculated that the 4 per cent. dividend on the ordinary stock of Cable and Wireles. (Holding) would be more than covered. He also took a hopeful view of the long-term effects of the flat rate scheme.
These are bound up, as Lord Pender reminded stock- holders, with the course of world trade, and he wisely refused to prophesy "when so many adverse factors affecting world trade and prosperity are prevalent." Last year, international trade, in face of its heavy handicaps, was surprisingly good Measured against 1929 as too the volume of international trade rose from 85.4 to 96.6 per cent. Reflecting this improvement, the revenue of the Cable and Wireless operating company easily established a record since the merger was formed. This year, however, as everybody knows, inter- national trade has contracted and the cable combine's monthly traffic index bears the marks of this movement.
For the first four months of 1938 the index of cable traffic receipts has averaged 72.9 against 86.2 per cent. in the corresponding period of last year, and 73.0 for the first four months of 1936. This is a steep fall and, if it continues, I cannot see how the operating company, even allowing for the suspension of the beam rental, is likely to achieve its standard revenue total. Again, in that event, one could not budget confidently on a 4 per cent. dividend on Cable and Wireless (Holding) ordinary stock, which is a very highly- geared equity. Since I last discussed this stock the price has fallen several points to 53 along with most other equities whose prospects are closely linked with world trade. At this level the yield on a 4 per cent. dividend basis is over 71 per cent.
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