|
Answer:
Dear Mr. Schnell,
Yes.
It's possible, although without knowing the stocks
in your portfolio, that must be a qualified "yes."
One
needs to keep in mind that stock splits are for the
most part a type of bookkeeping maneuver or strategy
on the part of companies. The purpose - to keep the
per share price low and thus attract a larger number
of investors.
For
example, a 2-for-1 split cuts the company's price
per share in half by doubling its number of shares.
If you own one share at $50, after the split you would
have two shares with a dollar value of $25 each.
Stock
Splits & The S&P 500
However,
your "feeling" may be right on target. In January,
Standard & Poor's issued a press release stating that
stock splits "continued at a slow pace in 2006, even
with dividends and buybacks continuing to set new
records and the market posting a 15.8% total return
for the year."
In
fact, during 2006, there were 37 stock splits within
the S&P 500 - the exact same number as in 2005, while
the average stock price was $50.94. That represents
the highest price since 1977 when it was $51.08.
Howard
Silverblatt, the senior index analyst at Standard
& Poor, explained that "with companies increasing
their dividends and buybacks to record levels in 2006,
the pace of stock splits justifiably slowed to a crawl."
He went on to say, "companies typically have a target
price range where they want their stock to sell. Before
conducting a split, companies want to see their stock
sell above the pre-split mark to demonstrate that
a down drift in their market price due to profit taking
will not put them below the post-split target price
range."
High
Prices & Status Appeal
Another
reason for not issuing stock splits in some cases,
may be a sort of reverse status appeal, especially
among well healed investors. Some like to boast that
they own a number of shares of a $500 or $100,000
stock. It's a sort of high status holding that goes
beyond how solid the investment may or may not be.
Pre-Correction
Philosophy
A
third reason for the slow down in stock splits could
be that we haven't had a serious or even semi-serious
market correction in a long time. That makes companies
cautious because if we do encounter a correction,
say of 10% or more, then companies are reluctant to
issue splits because after a correction the price
per share would fall.
For
More Information
Because
of your question, you may find the information at
www.stocksplits.net
interesting.
Good
luck!
|
