By Reuters
Apple announced a stock split on Thursday and it may not bode well for future gains in the
Dow Jones Industrial Average.
The iPhone maker made the surprise announcement in its quarterly report,
saying it will split its stock four-to-one when trading opens on Aug.
31, Apple’s first share split since 2014.
Stock splits have become rare on Wall Street in recent years, with just
three S&P 500 members announcing splits in 2020, compared to an
average of 10 a year over the past decade, according to S&P Dow
Jones Indices.
Splitting their stocks is a way for companies to make it less expensive
to buy individual shares, potentially attracting retail investors who
make small trades.
Amazon’s shares cost $3,051 each, while an Alphabet share sells for $1,538 and Chipotle Mexican Grill’s shares cost $1,148.
With Apple’s stock surging 6% in extended trade to $408 following its
strong quarterly report, the split means shareholders will receive three
shares for every one that they own. Investors will be able to buy
shares for closer to $100 each.
Apple said it hoped to make the shares “more accessible to a broader base of investors.”
However, brokerages increasingly let customers buy parts of shares,
making the benefit of share splits less clear than in the past.
“Stock splits have become far and few between because people no longer
care if it’s a $500 or $100 stock, because investors can now buy
fractions of shares,” said Howard Silverblatt, senior index analyst at
S&P Dow Jones Indices.
Splitting Apple’s shares means the Silicon Valley company will have less
influence within the Dow, which is weighted to the price of the shares
of its 30 components.
Apple was added to the Dow in 2015, and the 230% gain in Apple’s stock
since then has been a major factor driving gains in the Dow, widely
viewed as a reflection of the U.S. stock market.
Apple currently accounts for about 10% of the Dow, and after the share
split, it will make up only a quarter of that, ranking it the 18th most
heavily weighted stock in the Dow. Potential future gains and losses in
Apple’s stock will have less influence in the Dow’s performance.
Apple's stock split will not affect its weight within the S&P 500, which is based on market capitalization.
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