Company Notes
By CUSTOS THE long (three weeks) account on the Stock Exchange ended on a dull note and it is obvious that investors are becoming much more selective. A warning to that effect was first given by my colleague last October and was repeated last month. The revalua- tion of British equities to which he has referred is now probably in its final stages. The investor's job, as always, is to spot the companies which have not yet adjusted their capital or their distribution rate—and it has not been difficult to find some of the winners like MARKS AND SPENCER and IMPERIAL CHEMICAL INDUSTRIES. I would not suggest that it is always good policy to sell as soon as the bonuses have been declared. For example, we must wait till May to see what dividend Marks and Spencer intends to pay as a final for the exceptionally good year which ends this month. ASSOCIATED ELECTRICAL disappointed the optimists by paying a final dividend of 61 per cent. and bonus of 11 per cent. on the capital increased by the 100 per cent. bonus, making the equivalent of 111 per cent. for the year. The shares fell to 44s. 9d., at which price the yield is only 5 per cent., but as the Excess Profits Levy took the equivalent of a 131 per cent. dividend there is scope for an increase in the annual rate to at least 12+ per cent. which the market had foolishly expected this time. I remarked in November that I would not be in a hurry to buy these shares and if there is further talk of the rise in wages affecting the competitive position of British manufactures they may well come back in price. It is obviously a good " growth ' stock if bought at the right price.
THE directors of BOWATER PAPER, the giant of the paper industry, are to be congratu- lated on trying to make their 30,000 share- holders conscious and proud of the fact that they own a remarkable and colossal enter- prise. The general meeting is to be held on March 18th at Sittingbourne in Kent and shareholders are invited to travel down by special Putman train (with lunch provided on the outward and tea on the return journey) and visit their Kemsley mills—the largest
integrated woodpulp and newsprint mills in Europe. This, of course, is small com- pared with the new pulp and paper mills which the company is building in Tennessee, U.S.A. which will be in operation in the: spring. The whole of the Tennessee news- print output has been disposed of for fifteen years ahead under long-term contract with publishers in the Southern States. For the' year ending September the' company's earn- ings recovered to about 140 per cent. against 83 per cent. in the previous year and 168 per cent. for 1950-51. The dividend is being' wisely raised only from 15 per cent. to 16 per cent. because in April and May options will be exercised which will raise the, ordinary share capital by 50 per cent. to £5.4 millions. This will make last year's earnings equivalent to over 90 per cent. The maintenance of the 16 per cent. dividend should therefore be assured. The company and newsprint generally are vulnerable to an American reeession but I incline to the view that a minor, not a major, recession is now running its course. Bowater shares at 47s. to yield slightly under 7 per cent. seem reasonably priced. Ultimately there may be a bonus for undistributed profits and revenue reserves now exceed £10 millions,' but this must wait upon the repayment of, the American loan capital and the end or the period of big capital expansion.
INVESTORS who bought "glorious" TECHNI- COLOR 5s. shares when they were introduced at 10s. 3d. have done well to see them up to 20s. They will also be pleased by the. increase in the final dividend, bringing the annual rate up from 20 per cent. to 25 per cent. .But I notice that the rate of increase in earnings slowed down consider- ably in the year to November last. Techni- color has lost its monopoly now that the Eastman-Kodak colour process is being developed. The British film companies are naturally using the Eastman-Kodak process, in their new colour-printing laboratories. At the present price of 19s. to yield abou 6/ per cent. I regard the shares as f valued.
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