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98   THE OUTLOOK FOR RAILROAD STOCKS

          Net Earnings       Dividends    
Year --- (in millions) --- (in millions) 
1922 --------- 360 ----------- 271     
1923 --------- 555 ----------- 296     
1924 --------- 558 ----------- 320      
1925 --------- 700 ----------- 342      
1926 --------- 809 ----------- 399      
1927 --------- 673 ----------- 411     
1928 --------- 792 ----------- 428      
1929 (est.) -- 900 ----------- 460 

Certainly this is an excellent record. And it has been accomplished by improvements in operating efficiency an not by a rapid growth in traffic such as the railroads enjoyed in that upswing of earnings which followed upon the revival of 1898.
In the seven years which followed the outbreak of the Spanish-American War the gross revenues of the carriers rose from $1,247,000,000 in 1898 to $2,082,000,000 in 1905. Their net income went from 147 million dollars to 364 million. 
During these last seven years the gross revenues have grown less than 20 per cent. Yet the net income multiplied practically in the same ratio as during that earlier period.
It is interesting to recall what happened to dividends during that earlier period. They had reached 100 million dollars in only a single year previous tot he depressionf of 1894. They exceeded that figure slightly in 1893. By 1898 they had reached 96 million dollars. During the next seven years they grew steadily until in 1905 they stood at 237 million. This was almost two and one-half ties the amount paid in 1893.
Nor did the growth of dividends cease with 1905. It continued until, in 1910 to 1914, these payments averaged four times those of 1898.
The moderate growth of gross revenue during the last seven years has not been due to lack of industrial production. Its cause has been the competition of the automotive vehicle, in the transportation of both freight and passengers. The inroads of this new mode of transportation have been abnormally rapid during this period of motorization and road building. But the relative importance of this form of competition is likely to be less rather than greater in years to come. Much of the traffic, especially the less-than-carload business, is well lost to the roads. For with the increasing wages of labor, and with the increasing cost of terminal construction and operation, the business was probably carried at a loss.
Technical improvements in the railroad industry are going on at a rapid rate. We stand at the beginning of another period of outstanding improvements in locomotive construction and central dispatching is a revolutionary change which will reduce both expenses and necessary capital investment. 
It is a modest prediction that within the next decade the dividend payments of our railroads will be twice as large as they were in 1928. Thus far the disastrous experience of the war years, with their inflation and government operation, had held them at a low level. They have only just passed the high point of $397,000,000 which they had attained in the pre-war years. With growing business, and with the consolidations which are sure to take place during the next few years, they will enjoy rising earnings; and their stockholders will receive dividends which will make present prices for railroad securities seem low as one looks back upon them. In fact, prices 25 per cent higher than those now prevailing for good-dividend-paying rails will seem reasonable.