On August 20th, Apple Inc. (AAPL) declared a four-for-one stock split. This action is being taken while the corporation’s stock price continues to soar to new highs. On August 31st, 2020, the stock split will go into effect. Since the company’s IPO in 1980, Apple has split its stock five times. Each time, shortly after the split, the stock set a new record high.
Apple is one of my favorite stocks to watch and buy. When I was in grade school, my family bought their first computer, which was Machintosh Plus.
Over the last decade, we have seen Apple dominate the industry of mobile devices and emerge as a pathfinder among many competitors. I currently hold a position in Apple stock and think it is a great long-term investment. However, I don’t use a Mac or iPhone.
The stock split was effective for shareholders of record as of the close of business on August 24, 2020, and resulted in each shareholder receiving four shares of Apple stock for every one share currently owned.
Apple first announced its plans to split its stock in April, when it also said that it would increase its dividend and buy back $50 billion of its own shares. The stock split is seen as a way to make Apple shares more affordable for a wider range of investors.
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Apple’s 2020 Stock Split
Apple’s stock split took place on 31 August 2020. Investors will be issued four new shares for every one they currently own. Apple shareholders will continue to own the same proportion of Apple stock. The company will effectively increase the number of shares in circulation by dividing existing shares into four. The Apple board has approved the split, and it is scheduled to occur at the end of August 2019. Apple’s current owners will be eligible to receive the new share.
Apple announced last summer that it would be splitting its share in a 4-for-1 manner. What is a 4 for 1 stock split? It means that every stock will be split 4 ways. Imagine a pizza being cut for ways.
Why did Apple Stock Split?
Many Investors are asking, why did Apple stock split? The short answer for the split is to appeal to more retail investors. Apple’s chief financial officer, Luca Maestri, stated that the entire motive behind this decision was to make their stocks more accessible to a broader base of investors.
Thus, in a way, Apple allows ordinary investors to participate and be vested in the success of its different products, such as phones, tablets, and laptops. Similarly, from a broad perspective, not every company is future-oriented like Apple and understands the importance of retail investors.
University of Maryland business professor David Kass argues that stock splitting was a practice used by companies to keep their stock prices in the mid-double-digit range. Moreover, companies did this as often as possible because broker commissions were fixed, and investors preferred trading in “round lots” of 100 shares. In contrast, if an investor purchased less than 100 shares, broker commissions were amplified, the reason behind holding “round lots.”
However, the “round lot” gradually disappeared as investors began to purchase mutual funds instead of stocks and shares due to increasing broker commissions. Consequently, as stock splitting significantly reduced, successful companies and organizations had stock prices valued in the four-digit region.
If you own Apple stock, you might be asking what you have to be concerned about the split. The short answer is nothing. The board has already voted for the split, and it will happen automatically without any shareholder action.
Apple Stock Split History
Apple has split from $500 to $125. The most recent one adjusted its share price from $125 to about $500. Apple shares have beaten the market by at least 50 percentage points in previous years. Investors who bought shares before the split may have sold at the worst possible time. Apple has been a massive winner for buy-and-hold investors because the company has strong leadership and innovation. Remember: It’s easy to get overly enthusiastic or distraught after a quarter’s results, but three months is a tiny fraction of a company’s life span.
Apple stock went public on December 12, 1980, at $22 per share, but the adjusted IPO price after splits was $.10. You might be asking, “How many times did Apple stock split.” The short answer is 5 times. This is not an unusual amount of splits.
- 4-for-1 basis on August 28, 2020
- 7-for-1 basis on June 9, 2014
- 2-for-1 basis on February 28, 2005
- 2-for-1 June 21, 2000
- 2-for-1 June 16, 1987
Is the Apple stock a good or bad thing for investors?
Despite being out of fashion, stock splitting helps retail investors associate themselves with a large organization’s financial success. As retail investors are average individuals like you and me, buying a stock with a four-digit price tag is often never speculated. But what exactly is stock splitting, you might ask. Well, consider you own a stock worth $100.
A 2-for-1 stock split would make two stocks worth $50 each. In Apple’s case, a 4-for-1 increase would value the price of a stock at $96.19 instead of the market closing price of $384.76.
Many financial experts argue that stock splitting has nothing to do with the market value of a company. Just like stock splitting has not increased Apple’s market value, not doing so has had no difference in the market value of Amazon or Alphabet. On the other hand, companies often avoid splitting their stocks to retain power within organizational management.
Yet, Amazon stock and Alphabet stocks are not available to retail investors as their prices are valued in the four-digit region. Thus, stock splitting can be considered a smart financial move by Apple. But unlike Apple, Amazon and Alphabet are not retail companies.
Nonetheless, Apple’s stock split should be applauded as they have allowed ordinary investors a chance to hold a share in the company.
Additionally, Apple is a retail-orientated company that holds a large share in the consumer market. Therefore, it is assumed to be the correct decision. In the future, it would be beneficial for other companies also to take part in this activity; however, it seems highly unlikely.
Why did Apple split 7 to 1?
Apple did a 7-for-1 stock split on June 9, 2014, because Apple wanted the stock to be less expensive and appeal more to retail investors.
What happens when Apple stock splits?
During the last 4 times, Apple stock splits, Apple stock has, on average, dropped in price initially after the stock split. Specifically, if an investor had bought Apple stock after the stock split during the last 4 splits and sold two weeks later, the stock would be negative -5.6%.
What would $1000 invested in Apple in 1997 be worth today?
If you had invested $1000 in 1997, you would have 1,023,463.63, which is an annual return of 32%.
Should I buy Apple stock before or after the split?
Given that Apple’s stock has a history of dropping after a stock split, most investors would be better off buying the stock after the initial dip if they hadn’t owned it before.
Will Apple split in 2021?
It is unlikely that Apple stock will split in 2021 because the stock price has not climbed up. If the stock share price were to be over $200, it might be possible.
Is Apple stock a buy?
Apple stock has performed well in recent years, but many investors like Warren Buffet are unsure about the stock’s future.
The primary concern is that the company is historically a growth company but has entered a maturity phase. The company has recently tried different growth ideas, but it has not successfully broken into them.
That being said, Apple controls a huge amount of the mobile phone and device markets. It also has a huge amount of data and distribution network to users. Users of Apple products are extremely loyal and unlikely to change.
Is Apple stock a buy? I would say no if you are a growth investor. However, if you are a more conservative investor that believes in the brand and looking for a potential dividend, then Apple stock could be a good buy.
