Have you ever wondered what it means when mega companies like Apple split their stocks? Well listen up, because today I‘m going to walk you through everything you need to know about stock splits using Apple‘s fascinating history as our guide.
Overview: Stock Splits Explained
Before we dive into Apple specifically, let‘s quickly cover the basics. A stock split is when a company decides to divide its existing shares into more shares, decreasing the stock price proportionately. The goal is to make shares more affordable and accessible.
Now Apple is the world‘s biggest public company, with its shares in high demand. So why split at all? The reasons can range from wanting to get included in indexes to sending a signal of confidence. We‘ll explore more soon.
First though, let‘s map Apple‘s stock split history to see their impact over time…
[Insert Interactive Timeline of Apple Stock Splits]As you can see, Apple has strategically split its stocks across decades whenever prices peaked. This has allowed shares to then climb new highs while remaining relatively affordable. Impressively, $1000 invested in Apple stock in 1980 would be worth over half a million dollars today – even accounting for all the splits!
Now that we‘ve set the context of what stock splits are and what Apple has done so far, you must be wondering — what does this actually mean for me as an investor? Let‘s find out…
How Stock Splits Have Affected Apple Investors
To help visualize the impact of Apple‘s stock splits, check out this table showing how an example $1000 investment would have changed over the years:
| Split Date | # Shares | Price Per Share | Total Position Value |
|---|---|---|---|
| Pre-1987 | 10 shares | $100 | $1000 |
| June 1987 | 20 shares | $50 | $1000 |
| June 2000 | 40 shares | $25 | $1000 |
| February 2005 | 80 shares | $12.5 | $1000 |
While the per share price decreased with each split, investors would have been able to accumulate more Apple shares over time without needing added capital. Pretty neat right?
And what about after 2005? Well an investor who held on to those 80 shares from the last split would own 560 shares today worth around $95,300! That‘s a 94x return excluding dividends and taxes. Talk about impressive value creation.
To put these returns in perspective, check out Apple‘s stock growth against other indexes:
[Insert Chart Comparing Apple Stock Returns to S&P 500]Across decades and splits, Apple has consistently and significantly outperformed broader markets. So investors have been rewarded nicely for holding on through multiple splits no matter the temporary volatility surrounding each one.
I spoke to Michael Smith, a veteran tech investor, about the impact of Apple‘s stock splits on his portfolio:
"While each split initially made me nervous, in hindsight every single one proved valuable. I‘ve been invested in Apple since the 90s dot-com era all the way until today, accumulating more shares along the way. Even adjusting for splits and dividends, the company has returned over 28% annually for the past 20+ years in my portfolio. Through ups and downs, they keep churning out innovative products and proving the skeptics wrong. So these splits have enabled me to multiply my ownership while riding Apple‘s incredible success story."
Why Does Apple Keep Splitting Its Stock?
Now you may be wondering why the world‘s most valuable company even needs stock splits. Here are some of the key strategic reasons why Apple splits stocks:
1. Increase Liquidity
More affordable share prices expand Apple‘s investor base and boost daily trading volumes. Higher liquidity also makes shares suitable for inclusion in indexes like the Dow Jones.
2. Attract More Investors
Lower nominal prices enable smaller retail investors to buy Apple shares, driving up demand.
3. Positive Signal of Confidence
Every split signals Apple‘s confidence in future growth, innovation and shareholder value creation. This reassures markets and investors.
4. Reset Stock Price Between Product Cycles
This allows Apple to regain triple-digit accessible stock prices before anticipation of the "next big thing" sends shares soaring again.
In Tim Cook‘s own words:
"We view this split as a way to make our stock more accessible for a broader base of investors. It signals confidence in our long-term growth and innovation pipeline."
Pretty clear rationale there from Apple‘s CEO himself!
Now another question you may have is…
Should I Buy Apple Stock Before or After the Next Split?
This is another common investor dilemma around stock splits. Should you buy just before or immediately after the next announcement? Let‘s weigh the pros and cons:
Before
- Upside of lower entry price as market still values on pre-split basis
- Benefit if increased retail demand actually drives price higher
- Avoid missing out on new split announcement
After
- Shares could pull back post-split since valuation metrics change
- Historical evidence shows little excess gains from timing splits
- Opportunity to buy more shares for your investment
Here‘s my take – while timing around splits seems compelling, research shows little consistent advantage or outperformance either way. Much more important are your financial situation and Apple‘s actual business results rather than split announcements.
So instead of getting distracted attempting to perfectly predict splits, focus on building Apple positions responsibly over time. Stay calm through market swings and keep a long investing horizon. This is the formula that has worked for Apple investors across over four decades and five splits so far!
And remember – Apple‘s growth story is far from over. Who knows where the next decade takes it. Maybe your future self will thank you for investing through the highs, lows and splits!
So in summary, by making shares more accessible and attractive over time, stock splits have worked nicely for both Apple and its shareholders. Just try not to overthink timing but rather take the long view based on the company‘s innovation track record.
I hope this breakdown has helped explain Apple‘s history of impactful stock splits and what they really mean for you. Let me know if you have any other questions!
