STUDIES IN SECURITIES

On Actual On Increased Oper. Ratio
1926... £17.20 $13.12 73.8%
1925.... a 9.54 75.4
1924... 7.47 77.0
1923... 10.30 18.0

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Based on six months increase of exactly $1,500,000 in net income,
the calendar year 1927 results would equal $12.85 per share of the
enlarged common stock issue, since interest on the 6% bonds will
continue until the January 1 redemption while all the new stock
will not be issued until the December 1 final payment. Some
further trimming of expenses should be in store, particularly as
Baltimore & Ohio freight is 45% in cheaply moved bituminous
coal, and a 70% operating ratio would add about $4.50 to common
share earnings.

The restoration of common dividends late in 1923 after a lapse of
four years was at 5% rate. This with the December 1926 quarterly
 payment was increased to 6% and 14% extra paid to make
a total 6% for the year. From 1906 to 1914 69% was regularly
paid from earnings at considerably lower rate than now and on
past policy is based a reasonable expectation of 7% dividends to
some.

Following the 1924 and 1925 refunding of $135,025,000 bonds including
 nearly $120,000,000 314s with $2,137,000 consequent increase
 of annual interest, the 1927 financing frees Baltimore &
Ohio from consideration of any important maturity prior to $63,-250,000
 414s in 1933, and thereafter to 1941, excepting $19.-030,000
 miscellaneous amounts.

Destiny is believed to involve a closer alliance with the 1,140-mile
Reading Co. and its 53%-owned subsidiary 691-mile Central R. R.
of New Jersey in combination providing an entry to New York
tidewater having unequalled room for development. With new
purchases during 1926, Baltimore & Ohio at December 31 held
437,100 shares of Reading preferred averaging 40.21 cost and
262,900 shares of common averaging 40.66, the aggregate $28,-268,000
 being $20,000,000 below market quotations. This represents
 25.01% of Reading Co. stock and with practically identical
holdings by the friendly New York Central the basis for a closer
relation is soundly laid. Incidentally, Baltimore & Ohio in its
treasury has stock in the segregated Reading coal property of nearly
JI2000000 market value the disposal of which before 1928 is
ecreed.

The genuine value of the $215,187,800 Baltimore & Ohio common
Stock soon to be outstanding is to be measured not only by the
$81,483,000 protection in accumulated surplus but also by the fact
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