When one becomes two.
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 :)