JAS. H. OLIPHANT & CO. 
In part the gain in net income reflects the policy of financing by 
stock in substitution for bonds whereby dividend requirements are 
relatively as well as actually larger. Of traffic cost some 85% is 
for wages and the declining tendency indicates both more reason- 
able employment schedules and installation of automatic switch- 
ing equipment which last December 31 was serving 15% of all 
owned telephones. 
Abatement of demand for telephone service is not yet in sight. The 
investment in plant was 2,783 million dollars ending 1926, 1,363 in 
1920, and 667 in 1911, having doubled in the last six years and in 
the nine preceding. Mainly the continual need for funds is met by 
sale of stock at par. Six offerings were made from 1901 to 1916 
and subsequently one each year in 1921, 1922, 1924, and 1926, 
usually in one to five or six ratio. 
Earnings shown for American Telephone stock have been over 11% 
but below 12% each year beginning 1920, just exceeded 10% in 
1919, and were over 9% but less than 10% in seven prior years. 
Dividends have been 99% since 1921, were 8% in fifteen years there- 
tofore, and at least 714% has been paid during a forty-five year 
period. Value of rights in the last three subscriptions has ranged 
from over $2 to over $6 each providing if sold an ‘‘extra divi- 
dend.”” American Telephone stock deserves that investment con- 
fidence of the world’s greatest army of exceeding 400,000 stock- 
holders which price stability irrespective of general market con- 
ditions indicates 
American Tobacco Co. 
The great change in the tobacco business since the so-called trust 
was broken up fifteen years ago has been the phenomenal gain in 
cigarette sales. Current 90 billions output contrasts with little 
over 10 billions in 1911 and 25 in 1916. Annual increases were 
20.3% in 1923, 10.2% in 1924, 12.6% in 1925, 11.9% in 1926. A 
value exceeding $500,000,000 attaches to a year’s production and 
the few companies dividing it rank as important industrial enter- 
prises. The ‘‘Lucky Strike’’ brand developed by American To- 
bacco Co., although at present led by the ‘“Camel’’ and perhaps 
the ‘‘ Chesterfield’’ brands marketed by two one-time subsidiaries, 
is increasingly favored, and the company has a score of other 
products steadying its sales. Universality of the cigarette is ex- 
hibited by advertising of ‘‘Lucky Strikes’’ with prima donna 
testimonials. 
Under the competitive conditions during the fifteen years past, 
the American Tobacco Co. earned $256,392,000 total net after 
roo