When a company decides to split its stock, it generates a lot of excitement. A stock split occurs when a company increases its number of shares outstanding by dividing existing shares or by multiplying the share count and reducing the share price to compensate. A stock split lowers share prices but doesn't change the fundamental value of a business or the total value of the shares owned by shareholders.
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Lower stock prices for a growing business attract a lot of retail investor attention. For example, after splits, prices for Apple (AAPL 0.64%) (4-for-1 split on Aug. 28, 2020) and Nvidia (NVDA 0.7%) (4-for-1 split on July 19, 2021) both zoomed higher.
Retail Investor
Individuals who trade and invest in financial markets with personal funds, distinct from institutional investors.
As of this writing, few high-profile stock splits are scheduled for 2024. That said, Walmart (WMT 0.3%) announced a 3-for-1 stock split on Jan. 30, 2024. Shareholders on record at the end of the day on Thursday, Feb. 22, 2024, will receive two additional shares of Walmart stock for each share owned. The stock price will be cut in thirds to reflect the increased number of shares.
Walmart said this action is to help manage its stock trading levels and help employees feel like buying shares is a viable option. Walmart offers employees a 15% company match on the first $1,800 of Walmart stock bought each year.
Other stocks to watch out for that could split in 2024 include the following:
- Broadcom (AVGO 0.14%), with a stock price of more than $1,200 at the end of January 2024, has never enacted a stock split. But with shares spiking in the last year due to its AI networking semiconductor designs and the recent takeover of cloud computing company VMware, perhaps the company will deliver this year.
- Nvidia, with a current stock price of over $600 in early 2024, has also skyrocketed in the last year because of its graphics processing unit (GPU)-powered system sales for AI and accelerated computing. As mentioned, Nvidia has split its stock before, doing so just a few years ago in 2021.
- Chipotle Mexican Grill (CMG 0.62%) has never split its stock and, as a result, traded for more than $2,400 per share at the end of January 2024.
- Credit rating and financial analytics company Fair Isaac (FICO 0.9%) hasn't split its stock since 2004. After a 20-year hiatus, shares traded for almost $1,200 in January 2024.
- Booking Holdings (BKNG 1.08%) -- at the time, known as Priceline.com -- did a reverse stock split in 2003 in the aftermath of the dot-com bubble. Every six shares investors owned at the time were consolidated into one share. Each share was worth more than $3,500 by early 2024.
Stock splits in 2023
Stock splits in 2023
Thanks to the ongoing bear market, 2023 was a relatively quiet year for stock splits. However, several high-profile stock splits made headlines. Here's what you need to know about recent stock splits from 2023.
| Company | Stock Split | Announcement Date | Ex-Date | Payable Date |
|---|---|---|---|---|
| PACCAR (NASDAQ:PCAR) | 3 for 2 | Dec. 6, 2022 | Jan. 17, 2023 | Feb. 7, 2023 |
| Monster Beverage (NASDAQ:MNST) | 2 for 1 | Feb. 28, 2023 | March 13, 2023 | March 27, 2023 |
| Churchill Downs (NASDAQ:CHDN) | 2 for 1 | April 25, 2023 | May 5, 2023 | May 19, 2023 |
| Novo Nordisk (NYSE:NVO) | 2 for 1 | Aug. 10, 2023 | Sept. 14, 2023 | Sept. 20, 2023 |
| Mueller Industries (NYSE:MLI) | 2 for 1 | Sept. 26, 2023 | Oct. 6, 2023 | Oct. 20, 2023 |
| Celsius Holdings (NASDAQ:CELH) | 3 for 1 | Nov. 2, 2023 | Nov. 13, 2023 | Nov. 15, 2023 |
1. Paccar
Truck designer Paccar announced its 3-for-2 split in December 2022. The company paid out an extra share of stock for every two shares owned by shareholders of record as of Jan. 17, 2023. The distribution took place at market close on Feb. 7, 2023. Paccar's previous stock split in October 2007 was also a 3-for-2 split.
2. Monster Beverage
The energy drink leader announced the stock split during its fourth-quarter 2022 financial update on Feb. 28, 2023. For shareholders of record on March 13, 2023, Monster executed a 2-for-1 split by paying one extra share for every share owned; the stock price was halved to reflect the payment.
The distribution took place at market close on March 27, 2023. The company's previous split was a 3-for-1 split in November 2016.
3. Churchill Downs
Horse racing complex Churchill Downs, home of the Kentucky Derby, announced its 2-for-1 stock split on April 25, 2023. Shareholders of record on May 5 received an additional share for each share they owned. The distribution took place at the close of market on May 19, 2023. Churchill Downs' last stock split was a 3-for-1 split in January 2019.
4. Novo Nordisk
Novo Nordisk, the maker of popular weight-loss drug Wegovy, announced its 2-for-1 stock split on Aug. 10, 2023. Shareholders of record on Sept. 14 received an additional share for each share they owned. The distribution took place on Sept. 20. Novo Nordisk's previous stock split was a 5-for-1 split in 2014.
5. Mueller Industries
Copper piping and metals manufacturer Mueller Industries announced its 2-for-1 stock split on Sept. 26, 2023. Shareholders of record on Oct. 6 received an additional share for each share they owned. The distribution took place on Oct. 20. Mueller Industries' previous stock split was a 2-for-1 split in March 2014.
6. Celsius Holdings
Fast-growing energy drink company Celsius Holdings had another fantastic year of market share gains against leaders like Monster Beverage in 2023. After big stock gains, the company announced a 3-for-1 stock split, which it completed in mid-November 2023. The split was the company's first since its initial public offering (IPO).
Why companies do stock splits
Why companies do stock splits
Stock splits (as well as reverse stock splits) typically don't change the fundamental value of a company. They also don't change an investor's ownership stake in the company. For example, if you own a slice of pizza equal to one-quarter of the whole pie, cutting your slice up into smaller pieces doesn't change that you still have one-quarter of the total pizza.
Since a stock split doesn't really fundamentally change anything, why would a business choose to do one? Often, it has to do with attracting new investors. A smaller price per share gets a lot of individual investors interested in a popular company.
Additionally, many publicly traded companies give employees an ownership stake in the business by granting them shares in the form of stock-based compensation. A smaller share price can help a business manage the benefits issued to its employees.
Employee Stock Ownership Plan (ESOP)
An employee stock ownership plan (ESOP) is a benefit structure that pays workers in company shares.
Also, many companies repurchase shares as part of a return on investment to existing shareholders. A smaller share price can help a company manage the purchases and returns to investors.
Take Amazon (AMZN 0.03%) as an example. In the filing for its stock split in 2022, the company stated: "The Stock Split would give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest in the company."
Related investing topics
Should you invest?
Should you buy a stock because of an upcoming split?
If you are a long-term investor who plans to own shares of a company for at least a few years, an upcoming stock split is no reason to buy an ownership stake in a business. A company generally has good reasons for initiating a split, but it doesn’t change the fundamental value for shareholders.
Rather, look for companies benefiting from long-term secular growth trends, growing faster than their peers, and with healthy profit margins and balance sheets.
FAQ
Upcoming stock splits FAQ
Is it good if my stock splits?
Not necessarily. Sometimes, market interest in a stock increases when a stock split is announced. However, any stock price gains are temporary if the business's financial results don't increase to support the stock price speculation.
Do stocks rise after a split?
Sometimes. Due to increased retail investor interest in a smaller per-share price, often due to the misconception that a stock split makes a company "cheaper," a stock may go up after a split. But any gains tend to be temporary unless the business generates higher corresponding financial results.
How do you know when a stock is going to split?
There's no way to tell for sure whether a company's management team and board of directors will announce a stock split. However, strong business performance and a track record of stock splits might make an upcoming announcement of a stock split more likely.
What does it mean when a stock splits?
A stock split does not change the fundamental value of the business. Think of it like slicing a pizza into smaller slices: The overall pizza remains the same size, but more slices are available.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Nicholas Rossolillo has positions in Amazon, Apple, Broadcom, and Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, Booking Holdings, Celsius, Chipotle Mexican Grill, Monster Beverage, Nvidia, and Walmart. The Motley Fool recommends Broadcom, Churchill Downs, Fair Isaac, and Novo Nordisk. The Motley Fool has a disclosure policy.
