STUDIES IN SECURITIES

The record of the R. J. Reynolds Tobacco Co. entitles its management
 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.

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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 improvements
 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 remained
 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 exceptionally
 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

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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 unvalued
 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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