FINANCE AND INVESTMENT

By CUSTOS A DECLINE in speculative activity on Wall Street, combined with the strike movement among the electricians in this country, has been enough to cast something of a shadow over the cheerfulness that was in evidence on the London Stock Exchange last week. All the same, there is no disposition to take the setback too tragically. In fact, the first reaction of the dealers to signs of selling was one of mild rejoicing at the opportunity to acquire some stock to add to their depleted books.

The Wall Street position is by no means clear. New low levels for the year have been established in some stocks there, but there is little to suggest that we are on the threshold of a major recession. There are already signs of a rallying movement, and it would be premature to come to any definite con- clusion as to the outlook.

Activity in markets here continues to be concentrated mainly on speculative counters, but there is still no sign of major selling of the leading equities. Meanwhile there are hopes of further relaxations in the dividend policies of individual companies, and in- vestors who hold shares with large margins between earnings and dividends can look forward to some improvement in their incomes.

We now have an authoritative dividend forecast from the British Motor Corporation. The rate for the year is to be 101 per cent. This is rather a disappointment for those who were hoping for 12 per cent., but the outlook for the motor industry in this country is still sound, and the shares should prove worth holding.

Mr. Wolfson Reports The full report of Great Universal Stores, issued this week, amply bears out the indica- tions noted last month of a sharp improve- ment in the Group's liquid position. In fact, the consolidated accounts show that bank overdrafts in this country that last year totalled nearly £6m. have been completely repaid. This in itself is a sign of outstanding progress. Bank indebtedness in Canada has increased slightly, but altogether there is an increase in net current assets ofclose on £4m.

' As the preliminary figures suggested, the Ordinary dividend of 50 per cent. is covered four times by earnings. An additional point to bear in mind is that the group's provision for Excess Profits Levy absorbs the equiva- lent of a dividend of over 100 per cent., which opens up a prospect of tremendously increased earning power when the levy comes to an end next December.

In his statement with the accounts Mr. Isaac Wolfson, the chairman, makes an important reference to his plans for further activities in North America. He says : " As you well know the Group has, over the past twenty years, carried out a most successful policy of expansion in the U.K. It is my firm opinion that a great opportunity now exists to build up a complementary and perhaps larger business in Canada and in the U.S., based upon our proven trading methods in this country, but coupled with resident management with full knowledge of local conditions. I feel that this is of such impor- tance that I intend to devote a larger part of my time to this project to ensure the degree of development that I have in mind."

Four weeks ago " Gussies " Ordinary stood at 30s. 3d. cum the final of 1s. net. Now they are 37s. 6d. ex, at which they offer a yield of 6.6 per cent. I do not foresee a repetition of that sharp rise in the coming four weeks, but for the longer term I think they still have great possibilities.

Dubilier Condenser

After reaching the bumper figure of £213,964 in 1948 the trading profits of Dubilier Condenser Company (1925) for the next two years were at a much lower level, and they did not recover to the 1948 order of magnitude until 1951, when they touched £214,750. Then last year the directors astonished the market by reporting a figure over £400,000. The latest report shows that in spite of increased competition, necessitat- ing a reduction in selling prices, this position has been more than held. Taxation is heavier, though, and the net balance avail- able for the Ordinary is slightly lower.

In each of the last three years the directors have distributed a larger amount in dividends, but the latest payment of 25 per cent. (on a capital increased by a bonus issue) still absorbs less than a quarter of net earnings, and there is clearly room for further increases in the distribution as time goes by, provided trading conditions do not deteriorate. Dubilier is closely connected with the radio industry, and the competition in this field is exceedingly keen. In order to maintain efficiency large sums will have to be ploughed back in the form of development and re- search. The possibilities of growth are good, however, while at the present price of 3s. 6d. the shares yield 7 per cent. A fair return.

Australian Merchants' Prospects Such relaxation of the Australian import restrictions as has taken place to date has not been as liberal as many manufacturers in this country would have liked, but it has significantly improved the outlook for the specialist firms engaged in the export business here. One concern with a good record in this field is Tozer Kemsley and Milbourn (Holdings). This company oper- ates as a confirming house, paying for supplies, arranging shipment, insurance and finance, and granting credit to customers overseas, and charging a commission for its services. It is particularly associated with the business of exporting cars to Australia. Since it was made public in 1948 the company had built up a fine dividend record. For each of the past two years it has paid 20 per cent. as a straight dividend, plus a special bonus of 5 per cent. On each of these occasions the chairman has warned share- holders not to expect a repetition of the special amount, but the fact that it was forth- coming this year, after the comparatively unfavourable results then reported, suggests that the new warning need not cause too much alarm and despondency.

To be on the safe side it would be best to take the chairman's warning into account in working out the yield. With the £1 shares at 41s. 6d., as they are at present, the straight 20 per cent. offers a return of 9.6 per cent. The repetition of the bonus would make it 12 per cent.

Wolverhampton Metal Bonus

Another company has recently declared a bonus in addition to its dividend and left shareholders in some doubt about whether it will be repeated next year. This is Wolver- hampton Metal Company, copper smelters and refiners, scrap dealers, and so on. Among its activities is the salvaging of the Warspite. The board has recently announced the payment of a dividend of 221 per cent. on the Ordinary capital as increased by a 100 per cent. scrip bonus. The previous year 45 per cent. was paid on the old capital, so the amount payable as dividend is not altered. In addition, though, there is a Jubilee Bonus of 5 per cent. The company was incorporated in 1903, and to mark the fiftieth year the directors have given the employees a special Jubilee Benefit. In view of this, says the chairman, they feel that the shareholders should also have a little extra.

There is no other indication as to the likelihood of a repetition of this item next year. It is noticeable, however, that the company has a progressive record in the matter of distributions. Moreover, earnings on the one-class capital are reported at nearly 90 per cent., and reserves in the con- solidated balance sheet exceed the issued capital even after the 100 per cent. issue. Not counting the bonus, the yield at the latest price of 18s. 3d. is 6.1 per cent.' The prospect of growth is not to be ignored.