Apple’s 7-for-1 split: What you need to know

“Along with Apple’s (AAPL) fiscal Q2 report in April, the company expanded its capital return program. The buyback was hiked by $30 billion, and the dividend was increased by about 8%. Neither of these items were a surprise, although the dividend raise seemed a little light,” Bill Maurer writes for Seeking Alpha. “Included in that press release, however, was a big surprise: ‘The Board of Directors has also announced a seven-for-one stock split. Each Apple shareholder of record at the close of business on June 2, 2014 will receive six additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on June 9, 2014.’ There are a couple of different ‘groups’ impacted by this split. The first one is the options market, which will be thrown for a loop because a 7 for 1 split is not a standard one. It’s not as easy to play with as a 2, 5, or 10 for 1 split.”

“The next group that is impacted is just regular stock investors. Those that already have shares will now have more shares at a lower price. But for those looking to get into Apple, this split may be a blessing,” Maurer writes. “There is always the discussion that companies split their stocks to make them more accessible to investors. If I have $1,000 and I want to invest in Apple, I can buy one share right now, and have a chunk of money left over. But when Apple splits, and let’s say it is at $85 afterwards, I can buy 11 shares. While I still have some money left over, it’s not nearly as much as the first example. The market will also have more liquidity in regards to Apple, because shares will be cheaper. There will be a lot more shares outstanding, and daily volume will increase to a point.”

“The third group is actually Apple itself,” Maurer writes. “Apple has a lot of decisions to make in regards to the split and the company buyback. Before the split, Apple can retire shares quicker since they are higher priced… Additionally, Apple must try to guess what shares will do after the split. If Apple thinks the split will cause shares to rise a bit, then the company should be buying now. The upcoming split also explains why Apple put the quarterly dividend at $3.29 a share. That number is divisible by 7, so the post-split dividend will be $0.47 a share… This split could get Apple into the Dow, a move that will certainly shake up the markets a bit.”

Much more in the full article here.

16 Comments

      1. thats what I have been saying, I would think all the way thru xmas. Its going to be an incredible next earnings call for the next few quarters.

    1. Im as much of an Apple optimist as anyone, but you’re sniffing glue if you think AAPL will double within 2 years. The growth projections, even at their most optimistic, do not support a stock price twice what it is now.

      They would need another 2, or maybe 3 product categories on the scale of the iPhone and iPad to net a doubling of the stock. I can think of few people who might pull that off while at the helm of Apple, and one of them is currently decomposing in a box.

        1. I know, I’m one of those people who started at the bottom. I also knew when there was massive growth potential. Markets for current products are maturing. Only new revolutionary product categories will double a stock that already has the largest market cap in the world.

          See, there’s blind allegiance and theres being smart about it. Just assuming AAPL will always double is a huge mistake. Maybe it WILL double, but not without an actual REASON for it to do so.

          1. There’s plenty of reasons for it to double, plenty…

            My statement was not meant to include them, nor does it suggest “blind allegiance”, just a statement of what I and obviously many many more long time Apple investors, who are usually quite knowledgable of the company and it’s potency, believe to be fact.

            1. Ok so what are those reasons for doubling? Anyone can say “yeah, people who underestimated Apple IN THE PAST lost a lot of money.” That’s pretty clear in hindsight.

              There’s a reason brokers are required to tell investors “Past Performance Does Not Guarantee Future Results”

      1. Apple even with the recent stock rise is still undervalued.

        Aapl P.E is around 15
        Goog is around 30
        netflix is 148

        if Aapl was had the P.E of Goog the stock would be double already.

        why is Goog valued so high? Good spin and hype. Goog managed to convince investors it’s motorola disaster wasn’t so bad and Android which makes practically nothing is Great and profitless experiments like malfunctioning Goog glass is the future.
        A investor with real tech knowhow knows Goog’s ideas are hot air bs while Apple’s products and advantages like 64 bit mobile, working fingerprint senator, carplay, USA manufacturing etc are real.

        If Apple’s marketing (i.e hype machine) was as good as Google’s the P.E should be reversed. Apple should ALREADY be over 1000 now.

          1. didn’t even mention amazon in my post
            I mentioned Goog etc.
            why don’t you argue with me why Goog should have a P.E of TWICE apples when every major initiative it has for the last five years has been mediocre? Goog even makes more money from iOS services than Android services. Motorola’s 12 billion investment was a disaster, even the patents are worthless.

            AND can you explain why the AVERAGE of the S&P ‘s P.E is 18? The Nasdaq is 22 ! Apple is performing better financially, innovation, opening new markets etc than most of the companies on the S&P. So why is Apple’s PE lower than even some UTILITY companies with no growth and no prospects of growth unless it is UNDERVALUED ?

            Apple PE should be HIGHER than the S&P average, even if it was ON PAR at 18, the stock would be much higher than it is now. and if it was equal to the Nasdaq AVERAGE of 22….

            SO I stand by my argument that even WITHOUT new products aapl should be higher NOW.

            and if we DO talk about future product hinted at by Cook in the various speeches he’s made the stock should SHOOT UP. Also apple’s CURRENT tech leads haven’t even been FULLY EXPLOITED YET: for example fingerprint sensor for iPad, more 64 bit applications etc. (Samsung etc fingerprint sensors don’t work and android is a mess for 64 bit as the vast majority are cheapo low power phones. ) , pushing more money to apple.

            Aapl is down simply due to irrational media hatred for apple.

            ALSO apple’s real competitors at the where it competes in i.e the high end are collapsing , Apple’s supposed ‘flop’ the 5C outsold the Galaxy S4, HTC has lost profits in three straight quarters, Motorola for years, old enemies are also falling apart Msft fired it’s CEO, Dell sold…. Competitors which the press b.s is ‘winning’ like Lenovo MAKE ALMOST NO MONEY.. lenovo made 150 m last quarter, apple made 10,200 million (10.2 billion)….

            1. I transposed the part about Amazon from another post but my point still holds. And you were doing well until you got to the conclusion about AAPL being down because of irrational media hatred.

              I lifted this from an article I read last year about Amazon vs Apple (for example) and the disparity in P/E ratios. It basically boils down to competition. Amazon has none. Their moat is huge. They have the largest selection of products, typically best or competitive pricing, fantastic customer service and customer loyalty.

              Apple sells a premium product at premium prices. They have competitors with products which are marketed as similar for lower prices.

              In a nutshell, the stock market sees security with Amazon and less so with Apple, particularly as they whine and fret about Apple being slow to reveal the next huge product.

              Is it justified? Maybe not, but in the end the stock market is about buyers, sellers and their confidence in the stocks they pick. They feel more confident Amazon will be atop their hill longer than Apple will be atop theirs. Thus the higher stock price and P/E that goes with it.

            2. “It basically boils down to competition. Amazon has none.”

              LOL

              really? no competition??? LOL

              In books Amazon has onllne competition from Barnes and Noble, Chapters Indigo, etc and DOZENS more. Chapters matches Amazon prices and shipping and I’ve found books there amazon doesn’t carry.

              For the other stuff practically ever larger retailer has an online presence, walmart, Sears Staples , Whole Foods, Best Buy , Toys R Us, ebay has ONLINE etc
              and many also have Brick and Mortar stores which compete with amazon.
              PRACTICALLY EVERY ITEM SOLD BY AMAZON IS SOLD BY SOMEBODY ELSE, except amazon (see below) make NO PROFIT!!! Only a tiny fraction of amazon’s inventory like the kindles is unique….

              For Pete’s sake!! ” Amazon has no competitors ” !!!!?????
              this is an apple fan site, don’t you REALIZE APPLE COMPETES WITH AMAZON IN EBOOKS, MUSIC DOWNLOADS (where it kills amazon), Apps and tablets!!!!

              seriously? “down to competition. Amazon has none” Walmart is not amazon’s competitor, apple is not, Barnes and Noble is not…. ?

              Shoot PRACTICALLY EVERYONE IS AMAZON’S COMPETITOR!
              that’s why is MAKES NO MONEY!!!
              last quarter it made 108 million vs apple’s 10,200 million. Many quarters it actually loses money!!
              The stock is hype and a momentum ponzi scheme.
              Like I said before some of these companies have high P.e because of successful HYPE….

              Wide Moat MY FOOT !! lol, the moment amazon raises prices to ACTUALLY MAKE A REAL PROFIT it’s dead … D-E-A-D.

              (sorry dude, but you make the most laughable illogical post ever )

  1. Isn’t the example of how much money will be left over from $1000 a bit stupid? At the moment of the split the money left over would be the same (assuming you still decided to spend as much of the $1,000 as you can), it will only vary as the price varies – as it would have pre split. If the split causes it to vary more then yes you would get different amount, but it’s not as if the price is fixed at the moment.

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