Apple Inc. plans to split stocks 4 to 1, and this has important implications for the Dow Jones Industrial Average, of which it is a key component.
The iPhone maker announced on Thursday that its board of directors had approved the distribution of stocks. The split will affect record holders from August 24 and Apple AAPL shares,
which closed Thursday at $ 384.76 will be traded on an adjusted basis on August 31.
Because the Dow DJIA,
is a price-weighted index, the planned breakdown at the end of next month means that Apple will move from the most influential component of the 30-member blue chip index to perhaps the 15th or 16th most important member of the index.
Dow’s weighted weight means that the value of the inventory indicator is determined by changes in the prices of its components rather than percentage changes. The total value of the index is calculated by adding the price of the components and dividing the so-called Dow divider, which currently represents 0.144744568353097.
This means that every dollar movement of the company is reflected in a 6.78-point fluctuation in the 124-year reference value.
The divisor is responsible for allocating inventory, so the 4: 1 division of Apple will change its own effect on the benchmark and the divisor by which the index is calculated. The splitter is determined by the S&P Dow Jones indices, which own the Dow index.
UnitedHealth Group Inc. UNH,
which closed at $ 305.33, could become the most influential member of the Dow in late August. Home Depot Inc. HD,
is currently the third best-selling stock exchange in Dowa and ends Thursday’s trading for $ 266.31.
According to Dow Jones Market Data, Apple has been Dow’s largest and most influential component since April 29.
Other indices, including the S&P 500 SPX index,
a Nasdaq Composite Index COMP,
they are weighted by market capitalization and are therefore affected by the total value of their components.
According to FactSet, Apple is currently the largest company with market capitalization in terms of market capacity. Microsoft MSFT,
ranks number 2 at $ 1.54 trillion, while Amazon.com Inc. AMZN,
is the third most valued American company with a price of $ 1.513 trillion.
As a result, large-cap components had an excessive impact on returns for the broader market, with the exception of Dow, as equities hit their recent nadir in late March.
For example, the weighted Dow gained 41.5% from its lowest value on March 23, while the S&P 500 returned 45% and the Nasdaq climbed 54% over the same period.
Apple became a member of Dow as early as March 2015. At that time, AT&T T,
was scrapped in exchange for a technology monster based in Cupertino, California.
The distribution of shares in Dow components is not uncommon. Nike Inc. NKE,
in December 2015, it announced the division of stocks 2 into 1.
The announcement of the split of Apple shares came after the company dropped the COVID-19 crisis and announced record results on Thursday. The company reported third-quarter net income of $ 11.25 billion, or $ 2.58 per share, from $ 10.04 billion. USD or USD 2.18 per share in the previous quarter. Analysts surveyed by FactSet expected a stock of $ 2.05.