An instructive tabulation of the income statements of about 900 English companies for the year ended July 31, 1914, shows the following distribution of profits:

Net Profits

Preferred Dividend

Ordinary Dividend

Surplus, Reserves, etc.

%

%

%

Breweries .............

2,409,759

486,255

20.2

1,312,820

54.4

610,684

254

Gas .............

856,541

139,729

16.3

887,953

103.7

*171,141

*I9.8

Iron, Coal & Steel.

i,533,76i

275,244

17.9

669,196

43.5

589,321

38.5

Shipping...............

770,861

104,895

13.6

326,952

42.2

339,014

44.2

Teas, Rubber, etc.

535,699

31,247

5.7

400,384

75.0

104,068

19.3

Trusts ...................

160,725

25,663

16.0

109,220

67.9

25,842

16.1

Waterworks ...........

62,727

9,357

14.9

45,315

72.3

8,055

12.8

Miscellaneous ....

3,160,147

945,715

29.9

1,473,991

46.5

740,441

23.6

9,490,220

2,018,105

21.3

5,225,831

55.2

2,246,284

235

* Deficit.

It appears from the above table that preferred dividends received 21.3 of the net profits of these 900 companies; ordinary dividends received 55.2; and the balance added to surplus was 23.5.

It should be noted in passing that the gas companies paid out in ordinary and preferred dividends, considerably more than their net profits, showing that they drew in this year upon the surplus accumulated in previous years.

The London Economist comments on the above table as follows:

As usual the iron and steel and shipping companies have adopted a conservative policy with regard to the distribution of profits to their shareholders. Most of the rubber companies have no preference shares, and prefer to maintain their high dividends at the expense of the reserve funds. A very high percentage of the profits of the water and gas companies goes to the ordinary shareholders, and in the case of the latter large reductions have been made in the amounts carried forward for this purpose.

Although similar compilations for companies in the United States are not available, it is probable that the results .would be to show a much smaller proportion of earnings paid out in common dividends and a larger proportion reserved for additions to surplus. The tendency in European countries is much more strongly in favor of paying out the greater portion of earnings in the form of dividends than it is in the United States. Doubtless this is due in large part to the comparative instability of economic conditions in a rapidly growing country. It is due also, however, to the fact that different and in some respects more conservative standards of capitalization and of distribution of income have become established. This is a topic which will be more fully treated in the chapter following. It is in the meantime enough to point out that the statistics of a group of companies, although interesting and of some value as furnishing a standard of comparison, are not likely to prove of much assistance to directors in solving the problem for their own company. There are, however, principles which have been almost unconsciously worked out through the experience of thousands of corporations, and which are now accepted as sound by most conservative business men. These principles furnish the safest and most satisfactory guide.