Apple Inc. is planning a 4-for-1 stock split and it has significant implications for the Dow Jones industrial average, of which it is a key component.
The iPhone maker on Thursday announced that its board approved the share split. The split will affect record holders from Aug. 24 and Apple AAPL shares,
which closed at $ 384.76 on Thursday, will trade in a split adjustment on August 31st.
Because Dow DJIA,
is a price-weight index, the split planned at the end of next month means Apple will move from the most influential 30-member index component with a blue chip to perhaps the 15th or 16th member on significant index.
Dow price weighting means that the value of a stock is determined by changes in the prices of its components, rather than by changes in percentage. The total value of the index is calculated by adding the price of the components and dividing it by the so-called Dow division, which currently stands at 0.14744568353097.
This means that every move of a company’s dollars translates to a rate of 6.78 points at the 124-year standard.
The division calculates the stock divisions, so that way Apple’s 4-for-1 division will change its impact on the benchmark and the division with which the index is calculated. The division is determined by the S&P Dow Jones Indices, which owns the Dow indices.
UnitedHealth Group Inc. UNH,
which closed at $ 305.33, could become the most influential Dow member at the end of August. Home Depot Inc. HD,
is currently the third most valuable stock in the Dow, ending Thursday’s trade at $ 266.31.
Apple has been the largest, and therefore most influential, component of the Dow since April 29, according to the Dow Jones Market Data.
Other indices, including the S&P 500 SPX index,
and Nasdaq Composite Component,
are weighted for market capitalization and are therefore affected by the total value of their components.
Apple currently stands as the largest company for the market cap, boasting a value of $ 1.647 trillion, close to Thursday, according to FactSet data. Microsoft MSFT,
ranks No. 2 with $ 1.54 trillion, while Amazon.com Inc. AMZN,
is the third most valued enterprise by the US with 1.513 trillion dollars.
It is for this reason that large capitalization components have had a major impact on returns for the wider market, excluding the Dow, as stocks hit their last nadir in late March.
For example, the Dow with price weight has gained 41.5% since March 23 low, while the S&P 500 has returned 45% and the Nasdaq has climbed 54% for the same period.
Apple became a member of the Dow again in March 2015. Then, AT&T T,
was taken in exchange for Cupertino technology technology, Calif.-based.
Dividends on Dow components are not uncommon. Nike Inc. NKE,
announced a 2-for-1 share split back in December 2015.
The announcement of the Apple stock split came after the company cut short the COVID-19 crisis to report record results on Thursday. The company posted third-quarter net fiscal revenue of $ 11.25 billion, or $ 2.58 a share, from $ 10.04 billion, or $ 2.18 a share, in the previous quarter. Analysts surveyed by FactSet had forecast $ 2.05 per share.