(Reuters) – Apples (AAPL.O) announced the stock split on Thursday and may not bode well for future gains in the Dow Jones Industrial Average .DJI.
SLOT PHOTO: The Apple Inc. logo appears hung at the entrance of the apple store on 5th Avenue in Manhattan, New York, USA, October 16, 2019. REUTERS / Mike Segar / Photo file
The iPhone maker made the surprise news in its quarterly report, saying it will split its stock four to one when the trade opens on Aug. 31, Apple’s first share split since 2014.
Stock splits have become rare on Wall Street in recent years, with only three S&P 500 members announcing splits in 2020, compared to an average of 10 a year over the past decade, according to the S&P Dow Jones Indices.
Sharing their stocks is a way for companies to make it less expensive to buy individual shares, potentially attracting retail investors to do small business.
Amazon shares cost $ 3,051 each, while Alphabet shares sell for $ 1,538 and Chipotle Mexican Grill shares cost $ 1,148.
With Apple’s stock rising 6% in extended trading to $ 408 following its strong quarterly report, the split means shareholders will receive three shares for each 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 wider base of investors.”
However, brokerage always allows clients to buy shares of shares, making the benefit of share splits less clear than in the past.
“Shares of shares have become far and wide between people because they no longer care if it’s a $ 500 or $ 100 stock, because investors can now buy fractions of shares,” Howard Silverblatt said. , senior S&P index analyst Dow Jones Indices.
Sharing Apple shares means the Silicon Valley company will have less influence within the Dow, which is weighted by the share price of its 30 components.
Apple was added to the Dow in 2015, and the 230% gain in Apple’s stock has since been a key driver of gains on the Dow, widely seen as a reflection of the Dow market. shares of the United States.
Apple currently accounts for about 10% of the Dow, and after the shares split, it forms only a quarter of that, ranking it as the 18th most heavily stocked stock in the Dow. Potential future gains and losses in Apple stock will have less influence on Dow’s performance.
Apple’s stock split does not affect its weight within the S&P 500 .SPX, which is based on market capitalization.
GRAPH: Where did all the stock splits go? – here
Reporting by Noel Randewich; editing by Megan Davies and Tom Brown