(Reuters) – Apple (AAPL.O) announced the stock split on Thursday and may not be good for future earnings on average, the Dow Jones Industrial Average.
FILE PHOTO: The Apple Inc. logo is seen hanging at the entrance to the Apple Store on 5th Avenue in Manhattan, New York, USA, on October 16, 2019. REUTERS / Mike Segar / File Photo
The iPhone maker made a surprising announcement in its quarterly report, saying that when trading opens on August 31, Apple’s first stock split since 2014 will split its stock in four.
Distribution of stocks on Wall Street has become rare in recent years. According to the S&P Dow Jones Indices, only three members of the S&P 500 reported a breakdown in 2020, compared to an average of 10 per year over the past decade.
Dividing their shares is a way for companies to reduce the cost of buying individual shares and potentially attract small investors who do small business.
Amazon stock costs $ 3,051 each, while the alphabet stock sells for $ 1,538 and Chipotle Mexican Grill shares cost $ 1,148.
When Apple saw a sharp 6% increase in an expanded business to $ 408 after a strong quarterly report, it means shareholders will receive three shares for each they own. Investors will be able to buy shares for $ 100 each.
Apple said it hoped the stock would be “more accessible to a wider investor base.”
However, brokering increasingly allows customers to purchase portions of shares, making the benefits of dividing shares less clear than in the past.
“The stock split has gone far between them because people no longer care about whether it’s $ 500 or $ 100, because investors can now buy fractions of the stock,” said Howard Silverblatt, chief index analyst at S&P Dow Jones. Indices.
The distribution of Apple shares means that Silicon Valley will have less influence within the Dow, which is linked to the share price of its 30 components.
Apple was added to the Dow in 2015, and the 230% increase in Apple shares has since been a major factor in increasing the profit in the Dow, which was widely seen as a reflection of the US stock market.
Apple currently accounts for about 10 percent of the Dow and will only make up a quarter after the stock split, ranking it in the 18th hardest weighted Dow stock. Potential future gains and losses on Apple shares will have less of an impact on Dow’s performance.
Apple shares will not affect its weight in the S&P 500 .SPX, which is based on market capitalization.
GRAPHIC: Where did all the stock distributions go? – here
Noel Randewich report; edited by Megan Davies and Tom Brown