WSJ has an article about stock splits. Excerpted:
"If you are thinking that two nickels wouldn't make you any richer than one dime, you are right. [...] Some research has showed stocks that split have better long-term returns than those that don't, perhaps because investors believe splits signal corporate health. But those findings have been contested, and investors who think that splits are a reliable way to beat the market are asking for heartbreak."
If those big dumb apes named compaqaudi and fake cheezaroni are still out there I'd like to hear their big dumb ape responses to this. Or not.
Compaqaudi will play the role of the rube: "Hurr durr more shares is always better cuz it's moar."
Fake cheezaroni will be aggressively stupid and insecure as usual: "All of you, look at my money! LOOK AT IT!"
It has certainly destroyed GOOG buy not splitting!!! I think JNJ has enough outstanding shares out there. I don't think that a split would be in there best interest. MMA and Mutaul fund managers don't care what the price is. They are the ones that move stocks like JNJ. Not the little retail guy that says "hey I can buy 500 shares for $25000.00". BFD.
If you have 100 shares and the stock goes up 1$ you make $100 in capital gains
If the stocks splits, and then goes up 1$ you now make $200 in capital gains.
Stock splits double your capital gains.
i dont know why people always invest looking at dollars, its not about dollars its about percents. If a stock splits, you need double the dollar amount for share price to appreciate by. OR the same percentage increase..... I prefer analysis with percents
If I have 100 shares and receive dividends for 100 shares, that works for me. When this stock splits I will receive 100 more shares totaling 200. I WILL RECEIVE DIVIDENDS FOR 200 SHARES throughout the years, provided I don't sell off this stock which has always provided dividends & dividend increases for the last 50 years or so. I have held this stock for the last 20 years and will see more splits, and more chances to buy.
When your number of shares doubles in a 2:1 split, your dividend per share will be halved. As a result, the total dividend amount you will recieve for all of your shares will remain unaltered.
In my opinion, when you open the doors to retail investors via split it is long term beneficial. Volatility may increase but down the road I believe the benefits far outweigh any negatives.
I quess if J&J did'nt give out a dividend each and every year and increases each year I would'nt give a #$%$ about splits. But they do, and now my 4500 shares will double, my DIVIDEND will double until it hits 100 again.
You will get twice as many dividend "payments" but each "payment" will be half as much as before, so your total dividend income will remain the same -- unless and until the company raises the dividend, which usually only happens once a year for JNJ, and certainly wouldn't be a 100% increase!!!!
However -- if you want to go to sleep pretending to yourself that your income will double when the stock splits, then that's fine. Just fine. Sleep well. Pleasant dreams.
Thanks for your post!
I just read the WSJ article; here are a few quotes I enjoyed reading:
"But investors don’t always think so clearly..." (shocking!!!)
"Back then, active retail traders paid up to $1,000 a year for pager services that would beep them with news of upcoming splits. In 2000, one investor emailed me: “I own Intel INTC +0.67% and need two more splits after the one in July to retire.” (I never heard from him again; Intel hasn’t split since.)"
(I have been long INTC for over twenty years; lots of splits (yippee!!!). Pull up the long term chart and hit "events" and then click "splits". The last time INTC split its shares was 2000 and the COMPANY has not had such a high valuation since--but splits are a "good thing" LOL!.
"Splitting a stock costs a company at least a few hundred thousand dollars, say industry experts."
And my favorite:
"Companies appear to care less today about catering to the delusion that anyone can get rich quick off stock splits. Now if only investors would learn that the value of a business matters more than the price of its stock, we could all split and go home."
To paraphrase: IT'S THE COMPANY'S VALUATION THAT MATTERS and not the number of shares outstanding or the share price; what a novel, LOGICAL thought.
"So far this year, only 11 companies in the S&P 500 index have “split” their shares—the fourth-lowest number on record and down from an average of nearly 65 a year in the 1990s..."
As I have posted before, I am neutral re splits. Splits occur AFTER a the share price has risen. Both CL and BEN HAD risen and both split their shares this year, 2:1 and HOLY COW!!! 3:1 respectively. I've been long both for years. Now I have twice as many CL shares and THREE TIMES as many BEN shares. Problem is CL's share price was cut in half while BEN's share price was cut by 3. When I look at my statement, I look at the VALUE of my investments, not the number of shares I own.
Splits are "fun", but that's about it.