Apple’s recently announced a 4 for 1 stock split will present some issues for the Dow Jones Industrial Averages (DJIA) but not the S&P 500.
The DJIA is weighted by the market price of the underlying 30 component companies. Currently, Apple accounts for about 10% of the DJIA. After the split, this will be reduced to a quarter of that, changing Apple’s ranking from #1 to #18. Consequently, future gains and losses in Apple shares will have considerably less influence on the DJIA’s performance.
Apple’s split will not affect the S&P 500 as that index is based on each company’s total market capitalization.
Investors should take note when looking at performance comparisons involving these two indexes.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA