This archive report was first published on 31 July 2020.
On Thursday, Apple made a surprise announcement about a stock split, which may not bode well for future gains in the Dow Jones Industrial Average. The company's shares will be split four-to-one when trading opens on August 31, 2020, its 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 S&P Dow Jones Indices. This shift is attributed to the increasing availability of fractional share trading, which has made the benefit of share splits less clear.
Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, noted, "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."
As a result of the stock split, Apple's shares will become more accessible to a broader base of investors, with the cost of individual shares potentially dropping to around $100. However, this may also reduce the company's influence within the Dow, which is weighted to the price of the shares of its 30 components.
Apple's addition to the Dow in 2015 has been a major factor driving gains in the Dow, widely viewed as a reflection of the U.S. stock market. However, after the share split, Apple will make up only a quarter of its current 10% weighting, ranking it the 18th most heavily weighted stock in the Dow.
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