Apple is splitting stocks — should you buy?

Apple announced a stock split of 4 to 1 so is now the perfect time to invest?

Apple has been around for decades, producing some of the best tech gadgets around and the company just announced a stock split. What exactly is this; how does it affect investors; and should you invest in Apple ahead of the stock split? I’ll run through some numbers to help you make a decision.

What does Apple’s stock split mean?

A stock split is when a company takes a hit in stock price to provide potential stock buyers with an incentive to invest, as well as adding value to shareholders. It’s mostly cosmetic but does come with the aforementioned benefits. Apple is set to split its shares into four on August 24. If you have just one share by the end of the trading day on August 24, you’ll be rewarded with three additional Apple shares.

Now, there’s a catch since I spoke about a “hit in stock price.” Because Apple is splitting its stocks into four, the price will likely follow suit by being adjusted on a split basis. You can expect the stock to be trading at around $100 once again the next trading day. As you can see, this is a more appealing price for those who hold no stocks in Apple.

Why is it good for shareholders who already have stocks? Apple is a fantastic company to invest in. The dividend isn’t amazing, but it’s stable and the share prices continue to rise over time. The company has carried out stock splits in the past and the share price increased every time. So your newly acquired three shares will make up $400 with your existing share, but you should expect to see all four grow over time.

That’s essentially why Apple’s doing the stock split. In the company’s own words, it wants to make “the stock more accessible to a broader base of investors.” It’s an attractive company to back too. Let’s quickly break down some of the numbers from the recent earnings report:

  • Revenue: $59.7 billion ($52.3 billion expected).
  • Earnings per-share: $2.58 ($2.07 expected).
  • iPhone revenue: $26.42 billion.
  • Services revenue: $13.2 billion ($13.1 billion expected).
  • Accessories: $6.5 billion ($6.1 expected).

Those are some really positive figures, especially considering the current climate. Apple has performed well above expectations for 2020 thus far. So, should you buy some Apple shares? Absolutely, if you don’t have any already. Just be sure to get in before August 24.

By Rich Edmonds

Rich creates content for the top Windows-focused publication, but by night he tries to make his money work for him and rambles far too much here.

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