JAS. H. OLIPHANT & CO. 
On present gross revenues 5% difference in operating ratio means 
over 4% on the stock. Earnings for Norfolk & Western common 
were : 
1928... on.80 
1925... “R7 
1924. . : 
1923. 
1999. cna. 0, 
1921, 78 
1917. 15.0 
1916. . img 
yor 
fs ® = od 
Dividends were paid beginning 1901 every year, and 7% from 
1916 to 1925 with 1% extra in each year excepting the abnormal 
years 1918 to 1921 inclusive, with result the rate was considered 
8% in effect. An extra 3% was paid from 1926 earnings and in 
1927 the regular rate was advanced to 8%. Judging by past prac 
tice extras will be continued, 
Procedure in financing by Norfolk & Western shows the property 
to be built on solid rock. At present the capitalization is $120,068, - 
000 funded debt, $22,992,000 4% preferred stock, and $139,570,000 
common stock. Of the common stock $73,700,000 or more than 
half has been issued during twenty years in conversion of bonds for 
which over $74,000,000 cash was paid; about $1,150,000 bonds re- 
main to be converted. Taking the ten years since 1916, the com- 
pany has added exceeding $156,000,000 to the property, and aec- 
cumulated $26,930,000 or $20 a share in short term investment se- 
curities to employ surplus cash, represented by 92 millions increase 
in surplus and 27 millions increase in depreciation reserve, both 
being from earnings, and by 52 millions addition to outstanding 
stock and bonds. Between June 30, 1916 and December 31, 1926, 
this meant raising the proportion of 100-pound and heavier rail 
from 19% to 54% of all tracks, adding 129% to track mileage, and 
enlarging locomotive power 289% and freight car capacity 16%. 
For evidence of a strong equipment position, the annual net re- 
ceipts from rental averaged $2,420,000 1921-1926 or 1.7% on Nor- 
folk & Western common stock. 
Effect of the stock interest in Norfolk & Western held through a 
quarter century by Pennsylvania R. R. has been growth of the 
two together with seeming destiny of Norfolk a system membership 
under lease. Terms were discussed in 1924 but agreement not 
reached ; meantime stockholdings were increased from 36% to over 
43% by Pennsylvania. 
Admittedly the disturbances to customary coal trade in America 
and Britain have favored Norfolk & Western Ry. but allowing 
liberally therefor the earning power should support more than the 
present regular dividend. Negotiations again for lease would pre- 
sumably recognize the 10% paid last year. On its own, Norfolk & 
Western common stock has investment rating, while speculation is 
afforded in the lease possibility. 
[581