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HarryCaraysGhost (81.61)

When one becomes two.



July 21, 2012 – Comments (11) | RELATED TICKERS: KO

Greetings and salutations.

It's past noon in Chicago on another steamy day so lets crack open a beer and discuss stock splits.

On July 27, 2012 shareholders on record of the Coca-Cola Company will receive one additional share of common stock for each share held (distributed August tenth). Thus increasing the number of shares from 5.6 billion to 11.2. The dividend will be cut from 51 cents to 25.5 cents.

So what does that all mean.... well nothing really, it's just window dressing.

That being said I can't help but be somewhat excited since-

(a) never had a stock split positvely before. Have been privy to a few reverse splits and thats always an unpleasant experience the phrase lipstick on a pig totally applies. (Authors note- I've given up speculation for that reason and more, but that's an entirely different blog)

(b) The pshycological effect. People see that they can Buy 100 shrs of KO at $8,000 or at $4,000 which one do you think they'll pick. Kinda like how we pay for an $8 item for $7.99 or the fact that gas is measured to nine tenths of a penny.

Did an informal poll of people I know who don't really follow the markets and the resounding response was- OOOOH!!! splits are good. So I'm digging it.

Theres also this little factoid from Yahoo-" The Coca-Cola Company's common stock began trading in 1919. Since its original listing, the stock has previously split 10 times- first in 1927 and most recently in 1996. With all dividends reinvested annually, one share of common stock purchased for $40 in 1919 would be worth approximately $10.3 million today."

Please feel free to post your experiences with stock splits in the comments, I would be really interested to read what more seasoned investors have to say. (I started in April of 2008, nice timing right:)

Full disclousure I own The Coca-Cola Company in a direct stock purchase & dividend reinvestment plan, and have been loving seeing my share total slowly increase at nominal commissions.(I'll let you guys know when the dividend alone buys a full share, getting closer :) 


11 Comments – Post Your Own

#1) On July 21, 2012 at 5:15 PM, awallejr (33.93) wrote:

Well you are holding a good company there.  As Buffett once said "no one ever went broke owning coke" (the soda that is ;p)

Splits main allure is to lower the price to entice more investors for that psychological reason you gave. If you plan on investing say $1000 into a company whether it fetches you 100 shares or 50 shares shouldn't really matter. And it simply is not dilutive since your ownership interest in the company has not changed.

The best time to start getting splits is when you are early in a start up company (think MSFT) where price action keeps growing and those splits happen quite often.

"one share of common stock purchased for $40 in 1919 would be worth approximately $10.3 million today"

However the average worker was earning less than 5 cents an hour back then heheh.

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#2) On July 21, 2012 at 9:48 PM, HarryCaraysGhost (81.61) wrote:

A famous Coke investor-

Ty Cobb

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#3) On July 21, 2012 at 10:35 PM, Teacherman1 (< 20) wrote:

Congrats Harry

I may buy a few shares myself, after the split, especially if they drop some on the price of corn sugar because of the drought.

They are gold for the long run, but about as interesting as watching paint dry.:)

If you can manage to live another 93 years, you will be filthy rich.

Don't know if you are a CUBS fan, a SOX fan, or neither, but just in case you are a CUBS fan, wanted to congratulate you on their climbing out of the cellar, or was it my team, the Astros who just gave them a boost up on their young, entergetic, but very inept shoulders.

Cobb was as rough as a Cob, but at least, unlike todays players he invested in the right kind of coke. Of course, as a good old Georgia boy, what else could he do.

Have a nice "remainder of the weekend", and a good week next week.

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#4) On July 21, 2012 at 10:48 PM, awallejr (33.93) wrote:

Well as a long time Cardinals fan ( and I have some really fun stories) I am still smiling from the World Series ;)

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#5) On July 22, 2012 at 12:57 AM, HarryCaraysGhost (81.61) wrote:

Hi  Teacherman1

I'm thinking that the commodity price is already factored in, so you wont see a huge discount.

I'm a Cubs Fan, and part of my job as a sign installer is watching paint dry so I think I can handle it:)

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#6) On July 22, 2012 at 2:01 AM, HarryCaraysGhost (81.61) wrote:

awallejr (84.43) wrote:

Well as a long time Cardinals fan

I knew there was a reason why I never liked you;)

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#7) On July 22, 2012 at 10:00 AM, AltData (31.81) wrote:

" target="_self">Coke and Baseball... and Bottles

" target="_self">Coca Cola baseball commercial

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#8) On July 23, 2012 at 12:52 AM, ikkyu2 (98.18) wrote:

I have held a few stocks that split.  Some did well, some did poorly.  The underlying quality of the company was the deciding factor in every case.

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#9) On July 31, 2012 at 1:33 AM, esxokm (< 20) wrote:

Great post.

While a split has no mathematical effect on the stock itself, what about the options based on the stock? Does a lower price assist a small-time investor in making covered-call trades, for instance?

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#10) On August 01, 2012 at 12:06 AM, HarryCaraysGhost (81.61) wrote:

Thanx esxokm

I wish I could answer your question, but someone with more experience will have to answer that.

I understand the basics of options, but have never put them into place in real life. For that matter I've never shorted a stock or used margin. Really don't wan't to be told when it's time to sell. IMO that was what made the crash so bad. Just a domino effect while I was able to sit on my holdings.

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#11) On August 02, 2012 at 6:09 PM, TMFLegendPhoenix (< 20) wrote:

I'm a small-time investor (to say the least), and I'm starting to dabble with options.  To try to answer esxokm's question, the lower price makes the minimum amount of shares to write a covered-call option more attainable (100 shares) if one has not yet opened a position on Coke.  If you own 50 shares before the split, you'd be able to consider writing covered calls once your position doubles.

Hope that helps.

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