The First Split

In Wall Street brokerage offices one day last week, the tape-watchers suddenly sat up and began to take close notice. U.S. Steel, a high-priced blue chip that on most trading days is only moderately active, was leading the whole list in trading. In the biggest day's turnover (17,600: shares) since Nov. 10, Big Steel went up 1 1/2 points, closed at 73 3/8.

Next day, after the market closed, the reason came out. Big Steel announced that it would top its regular $1.25 quarterly dividend with an extra one of $1. It could well afford it. Last year's profits were $129.5 million--with another $55 million extra put aside for depreciation--compared to $127 million in 1947. And in the fourth quarter, when shipments hit an all-time record of 5.4 million tons, Big Steel's profits had soared 41% above 1947.

There was another reason for the stock rise. For the first time in its history, U.S. Steel decided to split its stock--3 shares for 1--if the stockholders approve next May. By thus lowering the price of its stock, Big Steel hoped to widen the ownership, and win more friends who might influence Congress if there is any more talk of putting the Government into the steel business. Next day, in a 55,100-share turnover--greatest since Nov. 7, 1940--U.S. Steel closed at 77 1/2, up 4 5/8 points, though the rest of the market sagged.

The profits were not confined to Big Steel. (President Truman, at his press conference, said he had always contended that steel prices were too high and he still thinks so.) Bethlehem Steel's net for 1948 was $90.3 million, up 76.8%, but the company cut no extra share of the dividend pie. Armco Steel, with a 28% increase in its profit to $32 million, boosted its quarterly dividend from 50-c- to 62 1/2-c-. Wheeling Steel kept to its regular rate ($1 a quarter), though its earnings had jumped to $23.24 per common share (v. $18.66 last year), nearly half the current market price of its stock. Even tiny Barium Steel, which had never paid a dividend, declared one of 10% in stock.

Big Steel's extra cut to its stockholders implied that steelmen expected the boom to continue. Said U.S. Steel's Chairman Irving S. Olds: "There has been little letup, almost no letup, in demand for steel." Bethlehem Steel's Chairman Eugene Grace entered a mild dissent: he had already detected some "softening in demand for many lines of steel." But Grace, who may have hoped by such talk to ease some of Washington's pressure for steel expansion, was not really pessimistic. Said he: "Even with the softening, I feel pretty safe in saying that our schedules will be substantially full for the first six months of 1949."

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