Apple Inc. is planning a 4-for-1 share split, and that has a big impact on the Dow Jones Industrial Average, of which it is a key component.
The iPhone maker announced Thursday that its board has approved a split. The split, which aims to make Apple more accessible to a wider range of investors, ”will affect record holders from Aug. 24. And Apple shares AAPL,
which closed at $ 384.76 on Thursday, will trade by size on August 31st.
Because Dow DJIA,
is a price-weighted index, with a planned split at the end of next month meaning Apple will move from the most influential 30-member blue-chip index component to perhaps the 15th or 16th most significant member of the index.
The Dow price ratio means that the value of a stock meter is determined by changes in the prices of its components, not by percentage changes. The total value of the index is calculated by adding the price of the components and dividing by the so-called Dow divisor, which is currently 0.14744568353097.
This means that every step of the company’s dollar means that the 124-year-old benchmark fluctuates 6.78 points.
The divisor forms inventory divisions, so Apple’s 4-for-1 division will change its influence on the benchmark and divisor by which the index is calculated. The divider is determined by S&P Dow Jones Indices, which owns the Dow Indices.
UnitedHealth Group Inc., UNH,
which closed at $ 305.23, could become the most influential member of the Dow at the end of August. Home Depot Inc. HD “,
is currently the third-largest Dow stock, with trading ending $ 266.31 on Thursday.
According to Dow Jones Market Data, Apple has been the largest and therefore most influential component of the Dow since April 29.
Other indices, including the S&P 500 index SPX,
and the Nasdaq Composite Index COMP,
are valued at market capitalization and are therefore affected by the total value of their components.
According to FactSet, Apple is currently the largest company by market cap and boasts $ 1.647 trillion. Microsoft MSFT
ranks second with $ 1.54 trillion, and Amazon.com Inc. AMZN,
is the third most popular U.S. company, valued at $ 1,513 trillion.
As a result, high-capitalization components had too much impact on returns to the broader market, with the exception of Dow, as stocks reached their last low level at the end of March.
For example, at the price of the Dow from March 23. The lowest prices rose 41.5%, the S&P 500 returned 45% and the Nasdaq rose 54% over the same period.
Apple became a member of the Dow in 2015. March. Then AT&T T
was taken in exchange for a behemoth of technology developed in Cupertino, California.
Dow component splits are not uncommon. Nike Inc. NKE,
2015 December. announced a split of 2 for 1 shares.
Apple’s split came on Thursday after the company overcame the COVID-19 crisis to announce record results. The company’s third-quarter net income was $ 11.25 billion, or $ 2.58 per share, compared to $ 10.04 billion, or $ 2.18 per share, in the prior-year quarter. Analysts surveyed by FactSet expected $ 2.05 per share.