The bull market is now six years old, and the Dow Jones Industrial Average (DJIA) and S&P 500 have bounced an average of about 200% each from the March 2009 lows. While investors have been enjoying ever higher dividends and buybacks at a new record, you just do not see waves and waves of stock splits any longer.
Keep in mind that stock splits are just one of the corporate governance tools used by companies to reward investors. That being said, stock splits on a standalone basis do not change a single fundamental about a company. Still, the reality is that investors just love stock splits.
24/7 Wall St. has identified several stocks that ought to consider splitting their stocks. Whether they will is another matter, but these are companies that seem overdue and also would benefit from a split — with management teams that might actually listen.
Another reason for companies to consider splits is to give retail investors an idea that they are getting another chance to buy the stock. Again, this simply may be a gimmick that investors just love.
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If you will recall, endless numbers of stock splits were seen in the late 1990s and just after 2000. That was during the tech bubble, when some companies doubled or tripled multiple times.
One consideration for companies is that the investing public is very different than the institutional buyers. Individuals often have limited funds to invest in a single stock, and people still prefer buying 100 shares rather than only three. Buying 100 shares of a $400 stock will cost $40,000.
If big companies want to see their shares keep participating in what is becoming a secular bull market, using the split gimmick is just one of many tools that mentally helps investors out. Companies such as Apple, Starbucks, MasterCard, Visa, Google and others have even capitulated and gotten into the stock split game.
24/7 Wall St. has included in its reviews the most recent share price and what it costs to buy 100 shares. Also included is when the split was (if it has split), and what the returns were since that split. The market capitalization, average daily volume and each stock’s 52-week range are included as well, as are a backgrounder for each company. We have added color on each concerning what one share costs versus the products these companies are known for.
Since our last look at potential stock splits, only one-fourth of the group actually announced a stock split: Apple, Google and MasterCard. 24/7 Wall St. did not include stocks such as Amazon, Priceline and LinkedIn this time around because it seems those companies do not want to or need to pay attention to outside influence. Also, Priceline’s last split was an unwelcomed reverse split after the tech bubble burst.
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The seven stocks identified by 24/7 Wall St. as likely split candidates are as follows: AutoZone Inc. (NYSE: AZO), Biogen Idec Inc. (NASDAQ: BIIB), Boston Beer Co. Inc. (NYSE: SAM), Chipotle Mexican Grill Inc. (NYSE: CMG), FedEx Corp. (NYSE: FDX), 3M Co. (NYSE: MMM) and Sherwin-Williams Co. (NYSE: SHW).
> Stock price: $663.00
> Cost per 100 shares: $66,300
> Last split: 1994
> Gain since: over 20-fold
> Market cap: $21.2 billion
> Average volume: 276,000
> 52-week range: $491.93 to $675.85
AutoZone Inc. (NYSE: AZO) just feels like a very strange bird to have a $662 share price. The company’s $21 billion market cap would be even larger had it not repurchased so many shares. AutoZone just recently announced a $750 million share buyback plan, and it disclosed that it has authorized $15.7 billion in total buybacks since 1998. The company has 5,042 domestic retail AutoZone stores, and the international store count takes it up to a total of 5,476 stores. If you walked into an AutoZone store, its share price would be massively higher than the median retail price of its inventory. Its website said it did split two-for-one back in 1994 and 1992. Management is perhaps more focused on buying back stock and driving earnings per share, and they can always argue that their share price has not been hurt as a result.
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