Tim Cook, CEO of Apple.
Justin Sullivan/Getty Images
  • Apple announced its fifth stock split in its history on Thursday, as the iPhone maker's stock price marched to the $400 level.
  • Apple said a stock split would allow it to "appeal to a broader base of investors." The move will appeal to investors who have a difficult time buying a stock that sports a triple digit price.
  • On August 24, Apple investors will receive three additional shares for every one share they own, while the stock price will be divided by four, bringing shares back down to the $100 level – around R1,700.
  • Apple's last stock split occurred in 2014, when it enacted a 7-for-1 split as its share price reached the $700 level.
  • One share owned prior to Apple's first split in 1987 will turn into 224 shares once next month's split goes through.
  • Visit Business Insider SA's homepage for more stories.

Apple will split its stock for the fifth time in its history, the iPhone maker said on Thursday after reporting strong earnings that beat analyst estimates.

Apple will enact a 4-for-1 split on August 24, meaning that every one share currently owned by an investor today will turn into four shares. At the same time, Apple's stock price will be quartered, going from around $400 today to around $100 (around R1,700) when the split is enacted.

Apple's dividend will also be quartered to reflect that share change once the split goes through.

The stock split has zero impact on the fundamentals or market value of Apple. What the stock split does, according to Apple, is help the stock "appeal to a broader base of investors." A lower stock price can make buying shares easier to stomach for investors, psychologically, at least.

Apple previously enacted 2-for-1 stock splits in 1987, 2000, and 2005, as well as a 7-for-1 stock split in 2014. One share owned prior to Apple's first split in 1987 will turn into 224 shares once next month's split goes through.

Apple is doing the exact opposite of Amazon. Amazon has seen its stock price rocket to above $3,000, and has yet to split its stock. Some investors think that a higher stock price attracts longer-term investors and discourages shorter-term traders, effectively reducing volatility.

But with fractional share investing capabilities now available at nearly every brokerage firm, that thinking is likely obsolete. As is the thinking that a stock split would broaden the appeal of the stock to investors.

One sizeable impact the Apple stock split will have on the market is related to the Dow Jones industrial average, of which Apple is a member. The 30-company index is a price-weighted index, meaning that moves in the index are based on the dollar move in the stock price, not the percentage move as in other stock market indexes.

Because Apple's stock price will decline from around $400 to around $100 once the split is enacted, moves in Apple shares will have less of an impact on moves in the Dow. Apple is currently the highest priced stock in the Dow, meaning that a move in Apple has the biggest impact on the move in the Dow.

Once Apple enacts its stock split, UnitedHealth will replace it as having the largest impact on the Dow Jones index.

Receive a daily update on your cellphone with all our latest news: click here.

Get the best of our site emailed to you daily: click here.

Also from Business Insider South Africa: