Gould, Drew and other railroad men of their time were also expert in the practice of "stock-watering." This consists in expanding the nominal capitalization of an enterprise without an equivalent addition to the actual capital. The rates which the railway has to charge the public tend to increase by approximately whatever dividends are paid on the water.[1] Then, as later, when a road was prospering greatly it would sometimes declare a "stock dividend," that is, give its stockholders additional stock in proportion to what they already owned. The addition would frequently be water. Its purpose might be to cover up the great profits made by the company. If, on a million dollars' worth of stock, it was paying ten per cent. dividends, the public might demand lower freight and passenger rates; but if the stock were doubled and earnings remained stationary, then the dividends would appear as five per cent.--an amount to which there could be no objection. H.V. Poor, the railroad expert, declared before a commission of investigation in 1885 that the New York Central Railroad was carrying $48,000,000 of water, on which it had paid eight per cent. dividends for fifteen years. He also estimated that of the seven and a half billions of indebtedness which the roads of the country were carrying in 1883, two billions represented water. Others thought that the proportion of water was greater. In any case the unnecessary burden upon business to provide dividends for the watered stock was an item of some magnitude. The investor, however, looked upon stock-watering with other eyes. The building of a new road was a speculation; the profits might be large, to be sure, but there might in many cases be a loss. In order to tempt money into railroad enterprises, therefore, inducements in the form of generous stock bonuses were necessary.