Surprise Dividend

When U. S. Steel's directors sit down to their monthly meeting at 71 Broadway --looked down on by the portraits of J. P. Morgan (Sr. and Jr.), Henry Clay Frick, Judge Gary, Myron C. Taylor, George F. Baker--no swarm of Manhattan newshawks waits outside the door. Their monthly meetings are devoted strictly to business, not to making publicity. The directors hear about broad company policies from their youthful, silver-haired chairman, Edward R. Stettinius Jr., keep up with production and sales operations by listening to tough-fibred, gregarious President Ben Fairless, learn about fiscal problems from their precise Finance Chairman Enders McClumpha Voorhees.

One day last week, while a languid Stock Exchange waited for the closing gong of another disappointing day, Big Steel's directors wound up another monthly meeting, went back to their offices. Fourteen minutes after the Stock Exchange had closed, the news came over the ticker: Steel had declared a $1 dividend on its common, its first since the fat days of 1937. It was also its first to be declared at a monthly meeting, and without forewarning rumors, in 23 years.

In a glum business world, still choked with inventory from the war-spurred boom of late 1939, it was a Page One story. For last week's steel production rate had sunk to a dismal 60.7% from the 90%-plus of last October-December. And on the Stock Exchange, U. S. Steel was stranded around 55, down one-third from last September when Hitler's mechanized army was mopping up Poland.

Day after Steel's surprise dividend, brokers went hopefully to Wall Street. They were rewarded by two million-share days. Although "X" hopped to a little over 57, up 3 1/8, before the rally faded, closed the week at 59, businessmen made their estimate of what Steel's dividend meant for business improvement: virtually nothing. For the week the Dow-Jones industrials average rose only 1.18, to close at 147.95. At this week's beginning the market was back in the doldrums.

To all businessmen it was plain that Steel, bellwether of U. S. industry, was not gaily charging around among the flock in approved spring fashion. Steel operations had had no "normal spring rise." While production stayed around 60% of capacity, the level of new buying was around 45%, below Big Steel's 55% break-even rate. A whacking slice of production, percentagewise, was still going into already bulky inventory. The story of the situation was written in the price of steel scrap, down to $16.50 a ton (the pre-war level). Worst of all: after a good fall, Steel's biggest customer, the auto industry, was running into signs of a production slump which, if it materializes, will slow down the consumption of steel inventories at auto plants.

Last week, after announcing Steel's common-stock dividend, Chairman Stettinius released Big Steel's annual report. It revealed simply and graphically more facts and figures than ever before. One striking figure: the Corporation's total sales of "goods and services" ($857,100,000) amounted to $3,829 per employe. Another: 1939's 43% rise in gross revenues, at an average of 60.7% of capacity, left Big Steel, after $25,219,677 in preferred dividends, a net of $15,900,257--less than half the deficit piled up in 1938 (with operations at 36.2%).

Said Chairman Stettinius of his dollar dividend: "This dividend declaration is based on the Corporation's earnings during recent months." Big Steel had disbursed, not on business ahead, but on profits behind--such as they were.

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