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more comfortable allowing their stocks to trade for hundreds of dollars.
Companies executing splits hope to attract more buyers by making the stock appear more affordable.
5 things to know about Apple
Whether Apple will now make it into the Dow Jones is the "$3 trillion question," says Howard Silverblatt, senior index analyst for S Indices.
THIS ISN'T APPLE'S FIRST SPLIT
Other factors contributed to the Apple rally: The company raised its quarterly dividend, committed an additional $30 billion to buying back its stock, struck a $3 billion deal to buy headphone maker Beats Electronics and previewed its latest software for iPhones, iPads and Mac computers.
The reason has more to do with psychology than logic. Splits lower a stock's trading price by substantially increasing the number of Cincinnati Reds Hat Black outstanding shares. Even though the company's market value remains the same, the prospect of a lower price per New Era Cap Florida Marlins
The maneuver provided a boost even before it was completed. Since the split was announced in late April, Apple's stock has climbed 25 percent, creating more than $100 billion in shareholder wealth while the Standard Poor's 500 edged up just 4 percent.
SPLITS ARE FALLING OUT OF FASHION
share often excites investors who previously shied away from a stock because it looked too expensive.
Stock splits once Adidas Hat Girl
seemed reflexive whenever a company's share price neared $100. In recent years, though, splits have dwindled as companies became Ny Hats Tumblr
To adjust for that swing, Apple's stock price fell dramatically from Friday's closing price of $645.57 to $92.22. On Monday, the shares rose $1.48 to close at $93.70. The closely watched benchmark is supposed to mirror key sectors of the economy, a role that seems perfectly suited for Apple given the popularity of the company's products and its $171 billion in annual revenue.
But Apple's high stock price made it impractical to include the company in the Dow. That's because the Dow's value is calculated in a way that gives greater weight to the companies with the highest stock prices. The method has discouraged the Dow Jones selection committee from picking companies with stock prices trading at more than $300. Visa Inc. is the only Dow Jones company with a current stock price above $200.
Apple executed a 7 for 1 split. That means every Apple stockholder received six additional shares for every share they owned as of June 2. The distribution will increase Apple's outstanding stock from about 861 million shares to about 6 billion shares.
Even though the overall stock market has been soaring, only 57 splits have been completed since 2009 among companies in the Standard Poor's 500. That compares with 375 splits from 1997 through 2000, a period that coincided with the dot com boom.
Apple has completed 2 for 1 splits on three previous occasions: May 1987, June 2000 and February 2005. The stock rose 2 percent in the first year after the 1987 split and surged by 60 percent in the first year after the 2005 split. The shares plunged 57 percent in the first year after the 2000 split, which occurred amid a steep downturn in technology stocks.
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