Last month Coca-Cola’s board announced a two for one stock split, the first in 16 years. A stock split basically doubles the number of shares you own. If you own 100 shares in a company, and the stock splits two for one, you end up with 200 shares. Companies generally split stocks when they think their share price has gotten too expensive or if the stock is trading too high compared to similar companies’ stock. A stock split is a good thing for shareholders if the stock price continues to rise after the split.
In the last 92 years the stock has split 10 times. “If the latest proposed split is approved, the company noted that a single share purchased in 1919 for $40 would be worth more than 9,000 shares and $341,545. If dividends were reinvested annually, the share would be worth $9.8-million.”*
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* source: The Globe and Mail, April 25, 2012