Southern Railway

For many years the Southern R. R. paid no dividends on its non-cumulative preferred stock or on its common. Meanwhile, with the development of the Southern states, the great Southern carrier fell heir to greater and greater amounts of freight. Profits were garnered and plowed into better equipment and right of way, with the result that operating costs fell rapidly. Presently, earnings on the common became noticeably great, and dividends were suddenly declared on the 5% non-cumulative preferred, and then, at the same rate, on the common. The rise in the latter stock has proved one of the sensations of the 1924-25 stockmarket.

The large earnings of the road, however, stuck in the crop of some of the preferred stockholders, who had waited dividendless for years. Presently some of them brought suit for $29,000,000, approximately, earned but not paid on the preferred prior to 1923. Talk of a 6% dividend on the common was promptly dropped.

In the Law and Equity Court of Richmond, however, Judge Beverley T. Crump recently decided against the suing preferred stockholders, on the grounds that preferred stockholders in the Southern have no fixed dividend chargeable on the road's annual earnings, and that therefore the Company is and has been free to pay or not to pay preferred dividends in its discretion, as long, of course, as common stockholders were not better treated.

While the plaintiffs have declared their intention of appealing, Wall Street considers the case virtually settled. The issue raised is important, and if the plaintiffs had been sustained, several other similar suits in other companies would probably have been quickly started.