STUDIES IN SECURITIES
Northern Pacific Ry.
Evidently, upon a 1926 showing of the best results from company
operation since 1917, Northern Pacific Ry. with 1925 ended eight
years of difficulties though never deficits. By reducing the divi-
dend after nearly eighteen years at 7% to 5% in 1922 the com-
pany was able to keep on adding to surplus each year.
As against a total $24,800,000 dividend curtailment, 29% annually
for five years, a total $81,650,000 was expended on the property
since 1917 which can be accounted for as follows: (1) $35,742,
000 surplus income including $9,980,000 Government help 1918-
1920 and $12,451,000 special dividend from the jointly-owned
“Burlington’’ in 1921, (2) $12,554,000 receipts from land sale,
and (3) $32,127,000 added through operating expenses to equip-
ment depreciation fund. Actually there was $817,500 decrease in
funded debt apart from issuance of $8,384,000 additional bonds
in 1921 to refund the Burlington stock purchase debt which sup-
ports itself with $1,448,000 annually over.
From these figures obviously the road was not only fully pre-
served but further improved in the years of blight and the earn-
ings now to compare with pre-war must include a return upon
the $80,000,000 interim property additions. The company reported
earnings return on railway property investment 6.4% in 1916
and 5.8% in 1917 but below 4% since 1918 and 3.5% average
1922-1926. Thanks to the invested surplus, however, the earnings
on Northern Pacific stock, compared with 10.9% in 1916 and 11.9%
(including Burlington extra dividend equal to 2.2%) in 1017,
were 8.9% (including Burlington extra equal to 5%) in 1921,
6.1% in 1922, 5.2% in 1923, 6.4% in 1924, 7.2% in 1925, and
8.5% in 1926. Up to 1917 for eleven years the net averaged 9%
with the least 7.6% in 1914-15. With capitalization $319,481,000
bonds and $248,000,000 or 44% stock a small margin in earnings
percentage over dividend rate represents a conservative saving
for surplus.
Integrity of the $187,852,000 surplus, giving $175 book value for
the stock, is checked by Government valuation of physical prop-
erty, and this is with $83,017,900 Burlington stock carried at 119
paying 10% and earning 14%.
Thriftily, the Northern Pacific has still conserved the possessions
of its subsidiary Northwestern Improvement Co., taking in divi-
dends only a small part of accumulating earnings from coal, ore,
and lumber activities. Liands owned by the railroad in 1926 were
5,582,000 acres valued at about $1.50 per acre and around 15%
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