5 Ultra-Popular Stocks That Should Enact a Stock Split Right Now
In more than two decades as an investor, I'd argue that no company action consistently generates more hoopla, while doing nothing from a fundamental perspective, than stock splits.
A stock split allows a company's board of directors to alter a company's share price by increasing or decreasing the number of shares outstanding. For instance, a forward 2-for-1 stock split of a company with a $100 share price and 50 million outstanding shares would yield a company with a $50 share price and 100 million outstanding shares. The market cap remains exactly the same, but the share price has been halved.
Even though stock splits have no impact on a company's valuation or underlying operating performance, they do bring a number of positive psychological factors to the table. For investors who aren't able to buy fractional shares of stock, a forward stock split lowers the cost to buy a single share. Perhaps most important, companies that engage in stock splits often have a nominally high share price -- and companies achieve a nominally high share price by executing and innovating on the operating front. In other words, companies splitting their stock are almost always performing above and beyond the expectations of Wall Street and investors.
Source Fool.com
