Owing to the intercorporate ownership of stocks and bonds and the consequent intercorporate payments of interest and dividends, it is no easy matter to make an entirely satisfactory estimate of the return paid to capital out of the purely transportation revenues of the railways. But the persistent reiteration by the Official Statistician of the fictitious aggregate of all the dividends paid by operating and non-operating companies, covering in 1908, by his own admission, $3,927,453,365 duplicated capital, justifies the attempt.

The operating income of the roads reporting to this Bureau for the year 1909 is arrived at thus:

Gross earnings (221,132 miles operated)$2,375,141,766
Operating expenses1,568,008,389
Net earnings from operation$ 807,133,377
Less taxes82,650,214
Net operating income$ 724,483,163

This $724,483,163 is the balance in the hands of the 368 companies of the moneys received by them from transportation, or, as the Official Statistician now calls it, "rail operations," for the payment of interest, rent, other deductions, dividends, additions and betterments, reserves, surplus and deficits. But before proceeding to this distribution these companies received $200,725,696 income from other sources, principally interest and dividends on stocks and bonds owned and for rent of track, and a net balance of $5,410,338 from outside operations. The total of these two sums, $206,136,034, may be arbitrarily applied first to offset the item of rent, $120,784,982, paid for leased lines and track, and the balance in payment of interest and dividends in proportion to the value of bonds and stocks owned as above, viz.: 36% and 64%, respectively.

This enables us to make the following distribution of the net operating income of the railways reporting to this Bureau, as follows:

Net operating income, as above$724,483,163
Disposition of same:
Interest on funded debt$324,181,521
Less paid from "other income"30,843,416$293,338,105
Interest on current liabilities22,546,779
Other deductions70,174,473
Dividends preferred stock50,183,739
Dividends common stock176,607,550
$226,791,289
Less paid from "other income"54,832,742171,958,547
Dividends on other securities769,222
Additions and betterments charged to income24,807,546
Appropriations to reserves16,984,447
Miscellaneous5,602,761
Deficits of weak lines4,996,195
Surplus available for adjustments and improvements113,205,088$724,483,163

This table shows the actual disposition made of the net income from operation of the roads reporting to this Bureau, representing 97% of the railway business of the United States, except that $120,784,982 of the income from other sources has been eliminated from the account and applied to offset the rental paid by the reporting roads.

It will be observed that the gross dividends declared were only $226,791,289, which is 3.64% on the par value of the stock of the 368 reporting companies.

Misrepresentations as to Dividends.

The discrepancy between this condition and the official statement as to dividends declared in 1908 calls for an analysis of the latter. This reads, "The amount of dividends declared during the year (1908) was $386,879,362, being equivalent to 7.99% on dividend-paying stock. For the year ending June 30, 1907, the amount of dividends declared was $308,088,027."