STUDIES IN SECURITIES 
The record of the R. J. Reynolds Tobacco Co. entitles its man- 
agement to first rating (entire executive personnel is constantly 
at the factory in Winston-Salem, N. C.) and its stock is among the 
industrial issues of real investment merit. 
Southern Pacific Co. 
oan 
Alone among the railroads the Southern Pacific Co. has let its 
dividend rate stand twenty years without change. Approximately 
half the earnings have been reinvested. The property still needs 
finishing touches doubtless, but this year several major improve- 
ments are complete including some first undertaken a generation 
aco, and the earnings are due to benefit. 
A record business for Southern Pacific system in 1926 was well 
handled, for revenues increased $3,699,000 and train movement 
cost decreased $5,715,000, and though maintenance was $2,643,000 
more the operating net showed $5,753,000 gain. Expenses re- 
mained above 72% of gross, however, and have ranged from 72% 
to 749% for five years. The neighboring Atchison system reduced 
its operating ratio from above 72% in 1923 and 1924 to 69% in 
1925 and 65% in 1926. Southern Pacific and Atchison appropriate 
about the same part of receipts for maintenance but if Southern 
Pacific had had similar transportation cost its earnings in 1925 
and 1926 would have been $4.70 and $3.70 per share greater than 
in actuality. To take up some of this earnings discrepancy the 
work of last vear need only be continued. 
Applicable to Southern Pacific stock the earnings have been excep- 
tionally stable if not large. Since the $6 dividend was begun never 
has less than $7 been earned. With 629 expense ratio in 1917 an 
$18 share net was shown. Results in the past six years were as 
follows « 
1026. ove svns. 310.40 
1025........... 0.60 
1924 . i 22 a0 
1923.4 een. 512.90 
1929... 0... 9.50 
162%: 2.90 
ok 
For the last three years, the company has disclosed the income of 
solely controlled affiliated companies, averaging an additional 98 
cents a share annually. Assets of these are greatly potential, such 
as 9,705,000 acres of lands including 3,297,000 unpledged and un- 
valued on the books, 29,000 acres of coal land, 20,500 acres of oil 
land with 4,000,000 barrels present production, and the 1,400-mile 
line adventuring down the fertile west coast of Mexico and just 
now operating in full. Here is plenty of speculative promise to 
go with the investment solidity of the transportation system 
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