Apple Stock Split Opens New Opportunities For More Investors

Apple Stock Split Opens New Opportunities For More Investors
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The Apple stock split will happen automatically after closing bell. The company announced its plan in April with its last earnings report and plans to buy back more shares and raise its dividend payments. Apple Inc. (NASDAQ:AAPL) said it was splitting its stock seven ways because it wants to make its shares affordable for more investors.

How the Apple stock split works

When the stock splits, basically the value of each share splits by seven, so don’t be alarmed when Apple Inc. (NASDAQ:AAPL) shares are suddenly trading by less than $100 a share on Monday. As of closing bell today, shareholders of record as of June 2 automatically receive six more shares of the company.

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Because of the timing of this split, investors will not be allowed to trade Apple stock after hours tonight. In addition, all the equity and option orders that are open as of closing bell tonight will be canceled and not re-entered without a new order, according to Apple Insider.

Apple stock looks attractive

So how should investors trade Apple Inc. (NASDAQ:AAPL) after the stock split? Of course there is a wide range of opinions on this topic. Jeff Reeves of InvestorPlace thinks Apple stock looks quite attractive, particularly since more investors will be able to afford it. He notes that Apple has been bringing in strong returns, rising more than 11% since the beginning of the year and outperforming the NASDAQ, which has increased by just 1% in the same time frame.

Of course this isn’t the first time Apple Inc. (NASDAQ:AAPL) has split its stock. This will be the fourth time, although the company hasn’t done one since 2005, and at that time, it was just two for one. Since that last stock split, shares have soared by 700%, again beating the NASDAQ by a wide margin, as it has only risen by 100%.

Apple could be added to the Dow Jones

In addition, Reeves notes that companies that split their stock last year outperformed the broader market. He believes that Apple Inc. (NASDAQ:AAPL) might even join the Dow Jones Industrial Average after the stock split because it just doesn’t fit into the price-weighted index right now. After the split, Apple stock would be right about in the middle of the companies that currently trade on the index.

If Apple Inc. (NASDAQ:AAPL) really is added to the Dow Jones, it could be a catalyst for the company’s stock, as there are many funds that trade based on the index. These funds would probably pick up Apple stock then after the split.

And then there’s the small matter of investor psychology. At around $650 a share, Apple Inc. (NASDAQ:AAPL) stock just doesn’t look cheap. But for some, it has a greater chance of doing so at less than $100 a share.

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