According to a new report this morning, Apple is considering a stock split that could add the company to the Dow Jones Industrial Average. Sanford C. Bernstein & Co predicts that Apple’s decision to issue its first dividend in 17 years to shareholders makes now a perfect time for the stock split.
Apple is currently in the NASDAQ index, but given the incredible financial success the Cupertino company has seen over the past decade, it makes perfect sense to move to the Dow Jones.
Apple’s decision in March to pay its first dividend in 17 years makes it more likely the stock could be added to the index after a split, said Toni Sacconaghi, an analyst at Bernstein who rates the shares outperform, in a report today.
“We see the timing as ripe,” Sacconaghi said. “Apple’s initiation of a dividend brings the company in line with all other Dow components. We note that Apple is currently the only company above $215 billion in market cap that pays a dividend and is not included in the Dow.”
A stock split usually happens when a board of directors (in this case Apple’s) observes that the company’s stock has risen too high when compared with the rest of the competing sector. The underlying value of Apple would not change, but AAPL would become more affordable for new investors. Given Apple’s hold on the consumer market, this kind of a move makes total sense.
Moving to The Dow Jones Industrial Average is just a natural thing for Apple to do at this point. As the best known market index for the biggest and most established companies on earth (IBM, ExxonMobil, Chevron, McDonalds, etc.), moving to the Dow would take Apple out of the professional investor, tech startup atmosphere of the NASDAQ and make it even more of a household name. If Apple does indeed move to the Dow Jones, AAPL would be weighted by share-price instead of overall market cap.
During its Q3 earnings call, Apple announced a cash dividend of $2.65 per share for investors that will be payed out on August 16th, 2012.
Source: Bloomberg Businessweek