Why Apple finally decided to split its stock 7-for-1

“After announcing its 7-1 stock split, Apple also outlined why it did so, answering in advance the oft-raised question with a simple answer: ‘We want Apple stock to be more accessible to a larger number of investors,'” Daniel Eran Dilger writes for AppleInsider. “Apple didn’t frame its statement to suggest a specific type of investor [to whom] it was hoping to make its stock ‘more accessible…’ but there are a couple reasons why a split would attract different types of buyers.”

“Institutional buyers, including mutual funds and other banking institutions, may have rules related to the maximum price of the shares they hold. By splitting its stock into a fraction that causes the share price to align with the rules of a greater swath of these buyers, Apple increases the number of potential buyers,” Dilger writes. “For individual investors, the psychology of a lower per-share price and greater number of shares might simply feel like a better deal, although, of course, the split has no direct impact on value.”

“After a two year period of irrational stock moves, Apple may likely want to erase the mental barriers investors may have about where Apple trades, as well as breaking any psychological links between Apple’s share price and that of other companies one might compare it against,” Dilger writes. “Dividing the stock price by 7 results in an entirely new set of numbers that aren’t easy to mentally translate in comparisons with past expectations. This is similar to how a tourist – in a country where the local currency is an unfamiliar fraction of the value of the currency [in which] his expectations are set — now looks at prices in a new way. The seven way split certainly explains why Apple chose an odd number for its new dividend: $3.29 is Apple’s first dividend to be evenly divisible by seven, resulting in 47 cents.”

Read more in the full article here.

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  1. It also turns the old $705 into the new $100 per share that everyone thinks that any good company can push past. In fact, when AAPL pushes past the $100, it will jump up to $105 to $125 per share like most stocks do as they pass the $100 per share point.

    Also, $142.86 is the new $1,000 per share.

    “Think Different” and enjoy the ride!

    1. Weren’t you one of the giddy ones the last time it ran up to $700? Try not to make the same mistakes again. Maybe then you can retire. There are no guarantees in life. Despite what it may look like today, no one can predict the future. Try to remember September 2012. Keep that month in mind. Please be careful.

  2. Besides all the maths stuff, I think also if small investors own a few shares of aapl they might tend to buy Apple stuff like iPhones, Macs vs something else. So Apple sells more products as well.

  3. when it splits, you will need 200-300 post split shares of AAPL to purchase 1 share of AAPL with your dividends. If you have around 25-180 shares or more now, that is something new coming your way.

  4. Can someone kindly enlighten me on these: After June, the dividend will be split-adjusted $0.47 a share, is that because the 8% increase in dividend takes place before the split ( in May vs. in June)?

    If so, how could it be called $3.29 a share?

    Come next year, when the dividend goes up again by another 8%, will the dividend payout be $3.xx a share instead of having it divided by a factor of 7 again?

    Many thanks in advance ^_^

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