Busy Signal

One of the few certainties in Wall Street's uncertain world is that American Telephone & Telegraph Co., the "widows' & orphans' stock," will always pay its $9 yearly dividend. A.T.&T., which has not missed a dividend in 50 years, has been paying $9 since 1922 when the rate was upped from $8.50. But last week Wall Street's faith in "Telephone" trembled for a moment. When A.T.&T.'s President Leroy A. Wilson asked his stockholders to okay a 10,000,000-share increase in stock (to 45,000,000 shares), traders began to wonder if Telephone could pay that big a dividend on so many additional shares. The stock broke almost 3 points, and the market broke with it.

But on second reading, the news did not look very frightening. A.T.&T., said Leroy Wilson, needed the extra stock (up to 3,000,000 shares of which it hoped to sell to its own employees) and more money simply because it had more business than it could handle. Even after $6 billion had been spent in postwar expansion to add 12,500,000 new telephones to its previous 22,000,000, the company still had 800,000 applicants waiting for service. It needed to spend $1 billion a year on expansion. To pay for it, A.T.&T. proposed to issue not only the stock, but $435 million in convertible debentures. If A.T.&T. offers them all for sale together, it will be the biggest single piece of corporate financing in U.S. history.*

Next day, traders decided that the more business A.T.&T. got, the more money it was likely to make. As the market, in characteristic perversity, rallied briskly, Telephone was bought as eagerly as it had been sold the day before. In the week's final session, the Dow-Jones industrial average hit an intraday high of 228.17, a new post-Korean high mark and only a hair below the bull market high last June. Like A.T.&T., Wall Street was still buzzing the busy signal.

*The biggest previous: A.T.&T.'s sale of $394 million in debentures last year.

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