Analyst: How to play shareholder-friendly Apple’s surprise 7-for-1 stock split

“Apple took a big leap toward becoming ‘shareholder friendly’ when it announced a 7-to-1 stock split Wednesday, a move that will shave off hundreds of dollars from current share prices, JMP Securities’ Alex Gauna told CNBC on Thursday,” Jeff Morganteen reports for CNBC.

“The stock becomes increasingly attractive to retail investors this June, when the measure takes effect and brings share prices into the mid-$70s, based on Wednesday’s closing price. Despite the more accessible entry point, Gauna has a counter-intuitive idea on how to play the stock: buy up its key suppliers,” Morganteen reports. “Gauna named microprocessor company ARM Holdings, semiconductor company Skyworks Solutions and Knowles, which supplies microphones to Apple and Samsung, as investment ideas. Those suppliers are growing faster than Apple itself, Guana added.”

“Tom McClellan, editor of The McClellan Market Report, called the 7-for-1 split a ‘peculiar’ number. ‘It’s also interesting that if you take the recent share price of Apple, well up in the $500s, and divide that by seven, that would put the share price of the split-adjusted Apple right down smack into the middle of the price range of all the 30 current Dow components,’ he said on ‘Halftime Report,'” Morganteen reports. “McClellan expected that Apple would join the Dow. ‘I think it’s likely to happen, and I think that apart from that, Apple’s likely to head up to a top that’s due in about June and then settle back some,’ he said.”

Read more in the full article here.

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27 Comments

    1. Enron’s stock was manipulated by Enron’s execs by using completely bogus financial reporting, not the analysts.
      Enron wasn’t actually making any money. Apple is.

  1. Will the dividend remain the same after the 7-1 split? If I have 1000 shares will it be 7000 shares at 3.29 a share- or will the dividend be reduced by a factor of 7?

      1. This is killing me… i sold AAPL right after the first iPhone was announced… to get in the options game…

        2008 blew up in my face…

        AAPL is a HUGE value stock now… if you’re already an employee of Apple, you really scored today… congrats.

        When Tim first announced dividends, i thought this was the safest stock to own… if you bought it pre-$400 level, it was a steal…

        Now i think this stock is going to have a HUGE run up… no need to compare it to GOOG… as some were doing when AAPL got to $700… AAPL has way more volume (and of course manipulated way more) than GOOG.

        Awesome… sit on AAPL and make $… now you can even buy more… and sit on those shares as well.

      2. … would have explained it, but essentially correct.
        A company says, in advance, approximately what the return rate is on a dividend-paying stock. Generally a percentage of the earnings. (I believe) Typically divided by four, if that’s the number of dividends paid in a year. So, if AAPL maintains its yield of 2.3%, each 7 post-split shares will get as much as a single pre-split share would have. Same answer, more detail.

    1. You get 6 shares for every 1 you won. So I would think you would take 1000×6=6000 shares. The dividend is going up to 3.29 per share. Not sure, but I would think that would be 3.29 per every 6000 share. 6000×3.29=19,740 but not sure. I’m just guessing here, sounds too good to be true.

      1. First the split is 7. For ever share you own you will get 6 so you will have 7. The dividend will divided amount total number of shares making the total value the same by less per share.

        1. That makes sense now….I understand the stock split, I wasn’t aware of the dividend split, but makes sense. Lets hope Apple stock goes back up to $500 within another 5 years or hit that $1000 we all been waiting for that Google got instead!

  2. I have two questions:

    1) Can you buy shares between now and june and those shares get split as well? I am assuming yes.

    2) After June 9th, the split happens and you have 6 shares for your every 1 share. Those new shares do you get dividends on those as well. So say I have 40 shares now, I should have 240 after the split correct, will those all get a dividend? So every quarter a dividend should be roughly 240 shares x 3.29 = $790 roughly correct?

    1. When the stock splits, the dividend splits with it. If you had 1 share that paid $5 a year, and it split 2 for 1, you would then have 2 shares, and they would each pay $2.50 per year.

    2. If you buy before the cut off date (which I read is June 2nd), any stock you hold as of that date will be split – but it’s a zero sum game if you have 100 shares at $560 a share, you on June 9th will have 700 shares at $80/share – the value does not change. It’s 7 for 1, not 6 for one. The dividend also gets cut by 7, which if you notice $3.29/share is $.77/share after the split.

      1. 100 shares now will equal 700 shares after the split. If the pre-split price is $560, the post-spilt price will be $80. 100 shares at $560 equals $56,000. 700 shares at $80 equals $56,000.

        The $3.29 per share pre-split dividend is $3.29 per share. If you have 100 pre-spilt shares each getting $3.29 you’ll get $329 total pay out. Your 700 post-split shares will pay 47¢ each, or a total of $329.

        Clear?

  3. I can’t believe how many people don’t understand what a stock split is. I have read a ton of posts over the last days with peole thinking their shares values will go down, or they will go up, or the dividend will give them some huge bonus now. Common people.

  4. Okay boys and girls, one more time:

    A stock split does not increase a stock’s intrinsic value. Imagine if I gave you a freshly baked apple pie. Now imagine if I cut the pie into six slices. You don’t have any more pie. It’s just that you have sliced it into smaller pieces.

    That is what a stock split is in simple terms. You are no richer than before. All you have done is taken the value of each share of the stock you own and sliced it into smaller pieces. So in June, when the Apple stock split takes place, you will have six times the number of shares that you had before, but each share, as well as the dividend paid quarterly will be one sixth the value for each individual share.

    You are no more wealthy. You don’t have any more pie. You just have more slices. No more, no less.

    For some investors, a stock split has psychological value. To those individuals, somehow a stock whose shares are priced at $80 is perceived as more affordable than a stock whose shares are priced at $570. That is not true in fact, as the price does not correlate to the intrinsic value of each share. It’s just that there will be more total shares in circulation, e.g., more slices of pie. But it might motivate more small investors to purchase shares of Apple stock – to them, they would rather own a slice of the pie, not the entire pie itself.

    As others have theorized, by splitting Apple stock’s price might qualify the company to be included in the Dow Jones Index, and that might cause mutual funds and other institutional investors to stock up on Apple shares.

    But the bottom line is that you won’t be wealthier because of a stock split. My tip to you is if you want to have Apple stock increase your wealth, do the following:

    1. Hold on to your stock for many years. Don’t jump in and out of a stock. Think of your investments as flowers or trees that you plant in your yard. It takes time for a tree to grow and bear fruit, and stocks behave in similar fashion. Just as you would plant the seeds, water them and let them grow, do the same with stocks you purchase. If you are patient, over the years, great things will happen when you invest in great businesses.

    2. REINVEST YOUR DIVIDENDS. If the stock you own pays a dividend, make sure you tell your broker (or click the box on the brokerage website) to reinvest any dividends. If you buy shares in a tax-protected IRA, even better. Over a 10-year period, reinvested dividends will likely double the number of shares you own, and studies show that over years, the returns on your investment in a dividend stock can double, quadruple or more. That takes time and patience. But clicking one box on a website can make you a ton of money.

    That’s all for today children.

    1. Big long explanation and you do not know math? You do not split the pie in 6 pieces, it will be 7. How can you not understand you will have SEVEN times as many shares after the split. You will have the one you have and will be issued six more. How stupid can folks be? 7:1 split…..7 to 1. 1+6=7 Come on. Jees.

      1. If you already own one share of Apple stock, the split will give you seven share, e.g., AN ADDITIONAL SIX SHARES. THAT is what I meant.

        There is no need to be so reactive. Hopefully, we can all be friends here.

        Have a nice day.

  5. Too many people are having trouble with basic mathematics. Perhaps the school system is to blame.

    The total dollar value of your shares does not change during a split, neither does the total dollar value of your dividends. Since you now have 7x as many shares, each new share is worth 1/7 of the $ of the one old share, but there are 7 new shares for each old share making the value 7/7 which equals 1. Same thing goes for the dividends.

    1. Its not basic mathematics……all the figures and this and that and some people not completely understanding the whole process is the problem. I knew about the stock split, but wasn’t aware of the dividends splitting as well. Makes sense now that it was explained by someone that knows what they are talking about. But its not just common sense and basic mathematics. I opened an account on my own and purchased the stock shares 10 years ago and that about the most I know and probably alot of others have done or are just lost completely and trying to get a grasp on what is going on.

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