Cuba and the Cuba Railroad

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CUBA

Cuba Railroad

The National Ciiy Company

New York

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Cuba

and the

Cuba Railroad

Cuba Thrniigh the enterprise of The Cuba

Company and of its .subsidiary, the Cuba
Railroad Company, the economic development of
Cuba has received a notable stimulus since 1900, and
the story of the growth of these two companies affords
a striking example of the many rich opportunities
which exist today in Cuba for profitable investment.
Prior to the opening of the twentieth century, capital
had not looked over-enthusiastically upon Cuba as a
field for investment, because the Island was in a state
of continuous ferment. For more than half a century, it
will be remembered, discontent and unrest in Cuba had
been increasing, and the agitation against Spanish rule
had steadily grown. During the three years preceding
American intervention a guerilla warfare of no small
proportions had been continuously waged. In such a
situation there was little to attract new capital for the
Island's development, which consequently languished,
so that it is not too much to say that Cuba would today
be much further advanced in every way had peaceful
conditions existed in the years before 1900.

The truth of this statement is evidenced by the
eagerness with which capital began to pour into Cuba
as soon as stable conditions were assured upon the
Island. It was not many months after the treaty of

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peace was signed between the United States and Spain
that The Cuba Company was incorporated by Sir Wil-
liam C, Van Home and his American and Canadian
associates. Van Home, born in Illinois of Dutch
extraction, had gained fame through his long associa-
tion with the Canadian Pacific Railway. He had been
in large measure responsible for the successful comple-
tion of this system, and in turn as General Manager,
President and Chairman of the Board, had been instru-
mental in directing its policies in the first and most
difficult years of its operation. Since 1885 he had been
identified with every branch of the commercial and
financial life of the Dominion, and such was his repu-
tation that where he led, others were perfectly willing
to follow. The creation of The Cuba Company was
the work of Van Home, while his ability as an admin-
istrator, devoted to its service until his death in 1916,
has brought success to its many enterprises and has
placed their operations upon an enduring foundation.

After the At the close of the Spanish-Amcr-

Spanish War ican War, the (Icvelopnieiit of Cuba
was limited almost entirely to the
western portion of the Island. The railways extended
eastward only as far as Santa Clara, 183 miles from
Havana. Beyond Santa Clara lay about 73^ of the
total area of the Island, almost destitute of railways.
In this section commerce was possible only by water,
and as the rivers of Cuba, though many, are largely
unnavigable, the tendency was for settlement to con-
fine itself to the narrow coastal strip. All along the
shores of the Island, both north and south, little towns
had grown up on the sheltered harbors, with small
areas of cultivated lands adjoining. Some of these

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settlements were large and commercially important,
while almost every one, with the better means of com-
mmiication which a railroad would afford, was capable
of great expansion. The interior, on the other hand,
was unsettled and undeveloped. With the exception of
ihe populated areas surrounding the cities of Sancti
Spiritus, Camagiiey and Holguin, which were con-
nected with one coast or the other by short lines of
railway, the country was unused save for occasional
herds of cattle, although the land was of extraordinary
fertility and well adapted to everything which can be
grown in a sub-tropical climate. All over this portion
of the Island, and especially in the- eastern end, there
were large forests of mahogany, cedar, lignum-vit^e
and other valuable woods, and also great unworked
deposits of iron, copper, asphaltum and other minerals.
With the immense potentialities indicated by its un-
settled plains, virgin forests and untouched mineral
wealth, the great interior plateau, elevated some hun-
dreds of feet above sea-level, awaited only adequate
transportation facilities in order to be quickly settled
and to have its natural riches intelligently developed.

The Cuba It was for this purpose that The

Company Cuba Company was incorporated in

New Jersey on April 25, 1900. Its
charter gave it broad powers: it was authorized to
operate railroads and electric railways, and to under-
take other enterprises of a similar nature. A survey
was begun immediately for a railroad extending along
the center of the Island from Santa Clara towards
Santiago, the second largest port in the country, but
which had hitherto been entirely cut off from com-
numication with Havana except by sea. The next step
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was the purchase of the SabaniUa and Moroto Rail-
road, an old road of about 30 miles which afforded the
only entrance into Santiago through a narrow moun-
tain pass. The work of constructing' the main line
from Santa Clara to a connection with this road was
begun in November, 1900, and the raiis were joined in
November, 1902, forming, in conjunction with the
United Railways of Havana west of Santa Clara, a
through route between Santiago and Havana, over
which through sleeping cars of the Pullman type are
now operated in daily service.

The Cuba On May 1, 1902, the Cuba Railroad

Railroad Company had been incorporated in

Company New Jersey, its entire common

stock being owned by The Cuba
Company. The railroad was sold to this subsidiary,
subject to an agreement that the parent company
should finish certain construction work, and since the
close of the calendar year 1904 the Cuba Railroad Com-
pany has operated the property.

The Cuba The Cuba Railroad was built with

Railroad an eye to the future, and to the

demands which traffic would make
upon it in years to come. The main line was placed
along the center of the Island, without regard to the
absence of population, but in the expectation that the
lack would quickly be remedied as soon as adequate
transportation facilities had been provided. This
belief, this firm faith in the future of Cuba, has since
received telling justification. The location of the road
was carefully planned so as to take the fullest advantage
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of the company's position as a pioneer in the devel-
opment of the railroad facilities of that part of the
Island. The main line divides the country almost
equally into two parts, and, by following the water-
shed, heads the streams making towards the sea upon
either side. This was a carefully thought out plan,
because these streams deepen and widen rapidly in their
descent towards the sea, and therefore interpose serious
obstacles in the way of would-be competitors, while at
the same time the Cuba Railroad is afforded easy
access by means of branch lines to the settlements
along the coast. It can readily be seen, too, that by
reducing to a minimum the size and cost of bridges
upon the railroad, as well as their number, the selection
of this route lowered construction costs, never small in
Cuba, quite materially.

Its Substantial It is rarely that a pioneer railroad in
Construction a newly developing country is built
■with the solidity of construction
which characterizes the Cuba Railroad. A new road
can be expected to earn only a small amount of money,
and as a general rule construction costs are kept down
to a point at which the line can be expected to give a
fair return upon the capital invested. Temporary
structures, light rails and little ballast are the rule upon
such railroads, and the contrary is the rare exception.
The Cuba Railroad followed the example of the Cana-
dian Pacific Railway, which in its turn had undoubtedly
been influenced years before by James J. Hill and by
the ideas which he afterwards incorporated in his own
Great Northern Railway. Mr. Hill, as anyone will un-
derstand who has studied the Great Northern, was an
advocate of good, solid, permanent construction, which

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could be expected to endure for many years, and the
same characteristics which have made the Great North-
ern a marvel of efficient operation are to be found, mod-
ified, o£ course, to suit altered conditions, upon the
Cuba Railroad. It is a line of easy grades, of few and
light curves, and in normal times is capable of being
operated at an unusually low^ cost. Its bridges are
largely of steel or masonry construction. It is ballasted
throughout with rock or with other suitable materials,
and has excellent up-to-date shops and other facilities.
The greater part of the road is laid with seventy-five
pound rail, which is ample for the traffic carried. The
pine ties which necessarily had to be used in the orig-
inal construction of the main line have been almost
entirely discarded in favor of the native hardwoods,
which have a fair life of over thirty years, and which
were made available in sufficient quantities as soon as
construction was pushed into the virgin forests in the
eastern end of the Island. The enduring nature of the
road's construction makes for low renewal costs, which
is a further important factor in reducing operating
expenses.

Its Influence The building of the Cuba Railroad

On Cuba's has brought about important

Development changes in the economic life of
Cuba, and especially is this true of
the provinces of Santa Clara, Camagiiey and Oriente,
which the railroad serves. The interior of these prov-
inces, which less than twenty years ago was virtually
uninhabited and undeveloped, has today a large and
growing population, and the commercial importance of
this section is steadily increasing. At the present time
fully one-half of the population of Cuba dwells within

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the confines of these three provinces, and all along the
mj(in line of the railroad thriving towns and busy in-
dustries have sprung up in remarkable fashion.

The sphere of influence of the railroad has grad-
ually been extended through the medium of branches,
which push out from the main line into the tributary
territory on either side. By this means, on June 30,
1918, the mileage operated had risen to 655 miles, an
increase of 247 miles since the Cuba Railroad Company
first took over the operation of the property fourteen
years before. Unlike the United States, Cuba is not a
land of magnificent distances, and as a consequence
these branches with one exception — ^the Bayamo branch
— are comparatively short. The Bayamo branch, which
serves the most fertile agricultural district in the whole
Island, is 141 miles Jong.

What the branches lack in distance, however, they
more than make up in importance. They have only to
reach into one of the developed coastal settlements in
order to be assured profitable business from the very
beginning, and they have gradually opened up almost
the entire eastern half of the Island to habitation.
Today cleared lands, new cultivation and herds
of cattle are to be seen everywhere. The growing
of sugar cane, which is the chief reliance of this
sub-tropical land, has been developed on a huge
scale; The Cuba Company itself has many plantations,
of which the two largest have under cultivation a com-
bined area of over 24,000 acres, while the number of
independent plantations, large and small, is legion. To-
bacco, coffee, cotton, fruits and vegetables are being
grown in large and increasing volume. Cattle raising
in Santa Clara and Camagiiey provinces is a profitable
industry, absorbing large amounts of capital, while the
dense forests of eastern Camaguey and Oriente have
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been brought within range of commercial exploitation.
The iron ores of eastern Oriente, reputed to be more
easily mined than our own Lake Superior ores, are be-
ing developed upon a bigger scale than ever. The
Spanish-American Iron Company alone has deposits at
Feiton which are estimated to contain three thousand
million tons of ore, the first ship-load of which was
moved in the year 1906, and at Daiquiri, near Santi-
ago, the deposits of iron ore are reputed to be the largest
in the world.

Expansion of When the Cuba Railroad Company
The Cuba took over the operation of the line

Company from the parent company, it must

not be surmised that the latter
found itself vvitli occupation gone, and with noth-
ing further to do. Rather did its real activities
wait upon the completion of the railroad, upon which,
like any other colonist. The Cuba Company was
dependent. For in earlier years, it had acquired large
tracts of land, located for the most part upon the lines
of the Cuba Railroad, and some of these lands have
been developed as townsites, while others have been
sold to settlers or developed as sugar plantations by
the company itself. Thus at Jatibonico there is a large
plantation covering 9,114 acres, and at Jobabo one of
15,550 acres. In connection with each of these, sugar
mills have been constructed, each with a capacity of
300,000 bags of sugar. At Van Home a new planta-
tion has recently been developed, and there are several
smaller ones in addition. As of February 1, 1918, the
sugar mills, plantations and townsites of The Cuba
Company were transferred to another subsidiary, the
Compania Cubana, a Cuban corporation. The Cuba
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Company has retained only 102,000 acres of unde-
veloped lands and the \'an Home plantation.

The Port of By far the most important of

Antilla the many tasks which The Cuba

Company has undertaken is the de-
velopment of Antilla, upon Nipe Bay. Nipe Bay, on
the northern shore, is one of the best harbors in the
Island — a land-locked bay with an area of 150 square
miles, around which today is going on the most tremen-
dous development in all Cuba. Upon its lands at An-
tilla, The Cuba Company has laid out a town o£ steadily
increasing importance. Here also the Railroad Com-
pany has developed a great port with large warehouses
for the storage of sugar, and huge molasses tanks with
a capacity of 3,000.000 gallons. At Saetia is the largest
fruit plantation in the Island, whose products go to
market in chartered fleets. At Preston the United
Fruit Company operates one of the largest sugar mills
in Cuba, and at Banes, a few miles distant, another
large one is owned by the same company. Nearby, too,
is Felton, where the Spanish- American Iron Company's
development is established. To such an extent has
Antilla grown that it is now the third largest port in
Cuba, with steamer connections to New York and other
points, and the line of the Cuba Railroad which serves
it— the first branch line constructed on the road — is
steadily growing in importance.

The Port of So congested within recent years

Nuevitas have the lines of the Cuba Railroad

Companybecome that this subsidiary
has decided to develop another port. For this purpose
the Camaguey and Nuevitas Railroad was purchased

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in 1915, reaching from Camaguey, on the main Hne of
the Cuba Railroad, to Nuevitas, which is upon a har-
bor equally as good as Nipe Bay. The advantage of
this port to the Railroad Company lies in the fact that
it is at the center of the system, which will operate to
relieve congestion elsewhere. Here, too, extensive de-
velopment work is going on; the old line has been ex-
tended as far as Pastelillo, where a new deep water
terminal of large capacity has been constructed. Four
large sugar warehouses have been built and tanks pro-
vided for the storage of 3,000,000 gallons of molasses.
Some time in the future it is planned to operate a car-
ferry between Nuevitas and Miami, Fla., where con-
nection will be made with the Florida East Coast Ry.
The CamagiJey and Nuevitas Railroad at the present
time is being independently operated, and, aside from
its strategic importance to the Railroad Company, is
an asset of large earning power.

The Cuba Railroad has been the energizing force
which has made possible the tremendous commercial
expansion indicated in briefest outline above, and nat-
urally this development has reacted to the Railroad's
benefit. Few people, however, will be prepared for the
statement that the Cuba Railroad has developed more
rapidly during the last fourteen years than any other
road of importance in this hemisphere, or, one might
safely say, in all the world. In this connection some
statistics of the company's operation will be of interest.

Earnings Upon the following page, for ex-

ample, are shown in graphic form
the major changes in the company's income account
during the period from 1905 to June 30, 1918. (The
company's business year ends on June 30). Reference
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CUBA RAILROAD INCOME ACCOUNT

YEARS ENDED JUNE 30
105 1906 1908 1910 1912 1914 1916 191

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to the graph will indicate that in but one year since
1905 have earnings failed to show a gain over the year
preceding. In 1917, when gross earnings showed a
large decline from the 1916 amount, the local political
troubles of the Island, which centered in Cuba Rail-
road territory, were responsible for the poor showing,
but with the United States taking a more active inter-
est in the political affairs of Cuba, it would seem that
there is no probability of a recurrence of such disturb-
14

ances. Together with the high costs of materials and
labor during 1917 and 1918, these disturbances also
reflect themselves in a disproportionate increase In op-
erating expenses during these two years. As a result
of its accumulation of troubles, 1917 shows up as the
poorest year which the company has experienced for a
long time. Indeed, it would not be incorrect to say
that 1917 was the only poor year which the company
has had in the course of its operation.

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The fiscal year 1905 was the first during which the
Railroad Company worked the property in its own be-
half, and the year's operations hroug-ht in gross earn-
ings of $1,029,258. In 1906, earnings amounted to
$1,600,000; in 1911 to $3,000,000. By 1915 they had
risen to $5,200,000, and to $11,645,098 in 1918. Re-
ducing these figures to percentages, this remarkable
railroad has shown an increase in gross of 1031% dur-
ing these fourteen years, which bears out the statement
that it has probably enjoyed a more intensive growth
than any other road in the world.

Operating expenses and taxes, represented on the
graph by the difference between gross earnings and
operating income, have not increased as rapidly as
earnings, in spite of their sudden expansion during re-
cent years. The graph shows that in 1905 operating
expenses and taxes consumed $733,635, or 71.28% of
earnings; in 1918, these charges amounted to $7,784,-
854, or only 66.8% of earnings. Thus, while revenues
record an increase of 1031%, expenses lagged behind
with a growth of only 961%, so that operating income,
which was $295,623 in 1905, was able to show an in-
crease of 1206% during these fourteen years, amount-
ing in 1918 to $3,860,243. Incidentally the amount
available for interest charges in 1918 was 13.32 times
the amount available in 1905.

During the years 1909 to 1916 inclusive, which
might fairly be termed nornial, operating expenses
never consumed more than 'olfo of earnings, and in
I9I5 the proportion reached the extremely low figure
of 47.61%. Had more normal conditions prevailed dur-
ing later years, there would undoubtedly have been a
much larger increase in operating income than was ac-
tually the case.

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It is worthy of emphasis that these tremendous in-
creases in earnings have been accompanied with only a
slight growth, comparatively speaking, in interest
charges, which rose from $258,175 in 1905 to
$1,311,487 in 1918. This is an increase of only AOSfo,
and attracts attention because it clearly demonstrates
the profitable use to which invested capital can be de-
voted upon the Cuba Railroad. The net income avail-
able for dividends, which in 1905 was $37,448, grew to
$2,625,591 in 1918, registering an increase during the
period of 6911%— almost seven thousand per cent.
This result — the translation of an increase of 1031 % in
revenues into a gain almost seven times as large pro-
portionately in the amount available for stockholders —
is one which needs no elaboration; it speaks for itself.

Expansion of The graphs which are reproduced
Freight Traffic on the next page depict the growth
of the road's freight business and
of its freight traffic density, the latter serving as an
excellent illustration of the development of the terri-
tory which supplies that trathc. The fiscal year 1908
is the first for which these operating statistics are
available, in which year the road carried a total of
44,080,599 ton-mile units of revenue freight. This
represents an average for each mile of road — a traffic
density — of 99,956 units. By 1918 the annual revenue
freight business had risen to 221,204,446 ton-mile
units, representing an increase of 402% since 1908,
while on an average each mile of road in operation in
1918 was yielding 337,411 units of freight, showing
an increase in the traffic density of 238%.
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CUBA RAILROAD

FREIGHT TRAFFIC

YEARS ENDED JUNE 30
1908 1910 1912 1914 1916 1918

200
FREIGHT
CARRIED
ONE MILE 160

120

MILLION
TON MILES

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FREIGHT
DENSITY 300

200

THOUSAND 100
TON MILES

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Increase in A clearer comprehension of what

Equipment the above figures mean may be

gained by reading them in conjunc-
tion with the graph upon the following page, which
shows the steady increase in the equipment necessary
to handle the growing business of the system. For the
sake of more accurate comparison the figures have
been distributed over each 100 miles of line in opera-
tion at the close of each fiscal year. In 1908, it will be
noticed, 275 freight cars per 100 miles o£ line were
sufficient to take care of the tonnage offered for ship-
ment. In 1913, 344 cars were required, and by 1917 the
number had grown to 788. In the following year
36 miles of new branches were placed in operation, and
as a consequence, despite an actual increase of 133 in
the number of freight cars owned, the proportion per
100 miles of line fell during 1918 to 765 cars. How-
ever, from 1908 to 1918 inclusive, the net increase for
each 100 miles of line was 490 cars, or 1789'f, while the
total number of cars owned rose from 1216 to 5013.

Growth of Passenger traffic is an important

Passenger source of income, providing in the

Traffic fiscal year 1918 approximately 307°

of the gross earnings. The graphs
on page 22, which portray the development of the
road's passenger traffic, are consequently of interest.
In 1908 the total passenger movement over the system
amounted to 29,970,722 passenger-mile units, and the
density of this class of traffic was 67,999 units per mile
operated. In 1918 the passenger traffic was 93,140,239
units, an increase of 2105^0, while the density was
142,200 units, recording an increase of 209%. During
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CUBA RAILROAD

GROWTH OF FREIGHT EQUIPMENT

NUMBER OF FREIGHT CARS
PER HUNDRED MILES

YEARS ENDED JUNE 30
1908 1910 1912 1914 1916 1918

800
700
600
500
400
300
200
100

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the same period the passenger cars per 100 miles of
Hne increased from 13 to 20, or 54%, and the number
of locomotives of all kinds, from 1! to 24, an llS/^o
increase. The actual number of passenger cars owned
in 1908 was 56. In 1918 it was 132. In 1908 the road
had 47 locomotives and in 1918 156.

Capitalization On June 30, 1918, the capitalization
of the Cuba Railroad Company

stood as follows:

Common Stock $15,800,000

Preferred Stock {6% non-cumulative) . , . 10,000,000

First Mortgage 5s, 1952 ■. 12,030,000

Improvement and Equipment 5s, 1960. . . 4,000,000

*Gold Notes 3,000,000

Equipment Certificates 3,158.000

Notes Payable 600,000

Total $48,588,000

"Secured by pledge of capital stock of Camagiicy & Niicvitas R. R. Co.

The amount of first mortgage bonds outstanding has
since been increased by $1,140,000, but there has been
a reduction of $1,000,000 in the gold notes and of
$416,000 in the outstanding equipment certificates, and
the $600,000 of notes payable have since been retired,
making a net reduction in capitalization of $876,000.

It has been previously pointed out that between 1905
and 1918 earnings available for interest and dividends
increased 1232% ; a noteworthy feature about the great
development in business which this implies is that it
was accompanied by an expansion of only 126% in the
capitalization. From this it is evident that the new
capital has applied a remarkable stimulus to the com-
pany's natural growth.

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CUBA RAILROAD

PASSENGER TRAFFIC

YEARS ENDED JUNE 30
10 1912

1916 1918

PASSENGERS
CARRIED
ONE MILE

PASSENGER 200
DENSITY

100
THOUSAND
PASSENGER

MILES n

PASSENGER 20
CARS

PER HUNDRED
MILES

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The greater portion of the increase in capitalization
has taken place in the funded debt, which provided
only $25 of each $100 of total capitalization in 1905.
as against $47 in 1918. Paradoxically each of these
conflicting; practices — the low proportion of bonds in
1905 and the increase which has taken place since that
time — shows the sure financial judgment of the man-
agement. It was good policy in 1905 to keep the pro-
portinn of bonds as low as possible, because the road
was at the time in its infancy; its earning power had
not been tested, nor was the success of the enterprise
by any means assured. Under the circumstances it
was advisable to keep down the proportion of funded
debt, as in that event the road stood a better chance of
earning its interest charges. Conditions have altered
since, however. With the large returns which experi-
ence has demonstrated will accrue to newly invested
capita!, it is sound business judgment which dictates
that within reasonable limits the new capital for the
company's expansion shall he provided by bonds, in
which case the profit on the investment over and above
the stipulated interest return upon the bonds accrues to
the company.

Mortgage From the conservatism which has

Bonds always characterized the financial

])ractices of the Cuba Railroad, if is
hardly to be expected that the stock investment will
ever be jeopardized by an over-issue of bonds, and the
mortgages by means of which the company does its
financing contain stipulations which make certain that
the amount of funded debt shall always be kept within
reasonable limits. The Cuba Railroad Company has
two open mortgages. The First Mortgage, as its name
implies, is an absolute first mortgage upon the entire

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property of the company, subject, upon certain equip-
ment, to the equipment trusts issued to purchase the
same, and upon the stock o£ the Camagiiey and Nuevi-
tas Railroad, to the issue of notes with which the
purchase of the stock was iinanced. The Improve-
ment and Equipment Mortgage is subject to the lien of
the First Mortgage ; in other words, it is a second mort-
gage upon all of the company's property, with the
minor exceptions noted above.

Under the First Mortgage, $13,170,000 of 5% bonds
have been issued to date, maturing on July 1, 1952, and
under the Improvement and Equipment Mortgage
$4,000,000 of 5% bonds are outstanding, which mature
on May 1, 1960. The issue of First Mortgage bonds
is limited to an amount of $20,000 per mile of road,
and the Improvement and Equipment bonds, which arc
designed to provide for the increased rolling stock and
terminal facilities which the growing traffic makes
necessary, are limited to not more than $12,000 per
mile.

Thus the debt of the company, so far as these two
mortgages are concerned, is limited to an aggregate
of $32,000 per mile under the provisions of the inden-
tures securing the two issues. It may be said that it
would be very difficult to construct any kind of a rail-
road in the eastern half of the Island for $32,000 per
mile ; the nature of the country would not permit. The
cost of the Cuba Railroad, as represented by its out-
standing capitalization, but exclusive of the Camaguey
and Nuevitas purchase notes, stood at $69,589 per mile
on June 30, 1918, of which only $24,500 was repre-
sented by bonds of either of these two issues, instead of
the $32,000 to which they are limited, so that there is a
heavy equity behind both the First Mortgage and the
Improvement and Equipment bonds of the company.

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Interest After having examined the safe-

Charges guards which surround the issu-

ance of these bonds, some attention
can profitably be devoted to a study of the interest
charges of the RaihTjad Company. The company
began well by earning its interest charges with a
margin to spare in its first year of independent opera-
tion. In 1906 interest charges were being earned twice
over, and in only one year since, which was the unfor-
tunate year 1917, have they been earned less than
twice. During the ten business years ended with 1918,
the interest charges were earned on an average 2^
times annually. Incidentally, attention is drawn to the
fact that 1917 was the only one of the last five years
dm^ing which they were not earned at least three times
annually. In 1918 interest on the First Mortgage 5s
was earned 6.6 times, indicating the exceptional char-
acter of this issue.

Dividends Dividends upon the preferred stock

were inaugurated in 1909, and once
begun, have always been maintained. For the last
six years this class of stock has been receiving the
full 6% to which it is entitled, although it was
deemed a wise policy to pay the 1918 dividend in
three-year scrip in order to conserve cash. The com-
mon stock is all owned by The Cuba Company, and
despite the fact that during the last nine years earnings
have averaged 7.66% annually upon the outstanding
amount, an essentially conservative policy has been
pursued in making dividend distributions. The initial
dividend upon the common stock was paid in 1913,
amounting to 4/^. In each of the three years follow-
ing 6% was paid, and in 1916 two stock dividends of
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20/fc and 25% respectively were also distributed. No
dividends have been paid since, although in the fiscal
year 1918 earnings were equivalent to 12.82% upon
this class of stock. The parent company has preferred
to forego dividends in order to strengthen the financial
position of the road, and this policy, while benefiting
the common stock, cannot but result in improving the
position of the rest of the company's securities, and in
enhancing its credit.

Conclusion In spite of the large development

which the Cuba Railroad Company
has enjoyed since it commenced to operate, it must
he said that the limit of its usefulness has not
yet been reached. The growth of the road keeps
pace with the development of Cuba, and there still
remains a large amount of fertile agricultural land
in its territory which has not yet been brought under
cultivation. The company enjoys a practical monopoly
of transportation in the eastern half of Cuba, where
its position is virtually unassailable. Its lines are
steadily expanding, and the Government has always
been ready to help with subsidies in the building of
important branches. The company is subject to regu-
lation under an enlightened Railroad Commission
which has realized the important part that the road
plays in the economic life of Cuba. Its bonds enjoy a
large margin of safety over their interest requirements,
and have a large equity in preferred and common stock
behind them. The management, directed by The Cuba
Company, is conservative, and, with the large inde-
pendent investment of the latter in Cuba, its officials
can be relied upon to operate the Railroad according to
the highest standard.

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A Broader Bond Service
for Investors

TliL' exceptional facilities o( The Nationai. City Companv

to serve investors have now been extended to more than

50 of the leading inveBtment centres of America where

correspondent offices have been opened.

Wherever you live, jou will find one o( these offices within

easy reach. Experienced bond men will be glad to discuss

with you your present holdings and the reinvestment of

your maturing funds.

More than 10,000 miles of private wires unite these offices,

and enable us to furnish you with prompt, accurate

information about bond markets, quotations, and new

The same conservative yet broad-gauged bond service
upon whicli thousands of the leading bankers, dealers and
institutions have learned to rely, is thus placed at the
disposal of private investors.

A strong Railroad Department makes careful selection of
attractive securifies of American and foreign railroads.
We also have United States Government, Foreign Govern-
ment, Municipal. Public Utility, Indnstrial, and Realty

Competent staffs of executives, engineers, accountants,
and legal advisors are available to pass upon security
issues, for the protection of ourselves and o
before we originate or participate in the sale of any i)

Send for Monthly Offering Sheet

The National City Company

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