Investing 102

[CRCRFT78]

Is there a benefit to buying before a split? My understanding is that if I spent $1000 today vs. after the split, I'm still going to end up with the same amount of shares because the price per share also splits based on the ratio.

[96z28ss]

Originally Posted by CRCRFT78

Is there a benefit to buying before a split? My understanding is that if I spent $1000 today vs. after the split, I'm still going to end up with the same amount of shares because the price per share also splits based on the ratio.

I think what you lose is the bump in price that the split can cause. Usually after the split the price goes up cause its now cheaper and opens it for more investors.

[CRCRFT78]

Is there any mention of an increase in the level of dividends accompanying the split or would that be announced at the time of the split? I'm trying to understand the possible benefits to a split other than more shares. The price will adjust accordingly so you really aren't gaining on that end. A stock dividend will also add more shares but the investment amount stays relatively the same. The one benefit to a stock dividend is that it won't be taxed until you sell unlike cash dividends.

Sorry I'm thinking out loud. Just trying to understand the benefit of a split. Unless the benefit comes in the long term with share prices rising beyond what they were before the split. Then I can see some benefit in which you didn't buy shares but received them via a stock split. I could be completely wrong about everything. Sorry for thinking out loud.

[CRCRFT78]

I think what you lose is the bump in price that the split can cause. Usually after the split the price goes up cause its now cheaper and opens it for more investors.

That would make sense. You won't be able to beat the market trying to jump in after the split so having the shares before hand should also net you the jump in price. I tend to overlook the simple and think about the complicated. Thats if the share prices rise after a split.

Would a date be announced similar to an "ex-dividend date" or "date of record" for a split letting you know when you'd have to own the shares by to split your shares?

[GregWeld]

Jose ---

Usually a spilt is like getting a bump in the dividend -- because generally the stock continues to rise -- but now you have twice as many shares. That's not always true - but generally a company splits it's stock because things are going well. That's really the most crucial underlying point -- you want own good (GREAT!) companies to begin with... and the rest just "happens".

Splits are what made the dot bomb companies go crazy with share price growth -- Microsoft - Dell - Intel - etc all split and had babies like rabbits. Back then it was a lot of explosive growth -- where as Coke (KO) is just good old fashioned organic growth.

So here's the real crux of anything like this - whether you buy before - during or after a split -- what you really want to buy is a great company. Don't play the split 'game' -- if it's a company you want to own - great - if not - then move on and buy something else but don't buy just based on some exogenous event.

[CRCRFT78]

Coke has been on my "buy" list for a while, I'm just wondering if there was a way to benefit from the split. Either way I'll pick it up.

[GregWeld]

Originally Posted by CRCRFT78

Coke has been on my "buy" list for a while, I'm just wondering if there was a way to benefit from the split. Either way I'll pick it up.

I think you'd benefit regardless of the split.... It has a 50 year track record of great growth -- pays a dividend... and blah blah blah... but it's a long term buy and hold - reinvest the dividend kind of stock.

[toy71camaro]

Originally Posted by CRCRFT78

Coke has been on my "buy" list for a while, I'm just wondering if there was a way to benefit from the split. Either way I'll pick it up.

Same here... have had my eye on it for a while now, just saving up the $ to the price point that i want to make purchases at ($1k for me).

Im curious as well, if its worth jumping into before, or like previously mentioned, wait til August before jumping back into the market... either way, long term, it probably wont make a HUGE difference, but could be a subtle difference down the road.

[GregWeld]

Originally Posted by toy71camaro

Same here... have had my eye on it for a while now, just saving up the $ to the price point that i want to make purchases at ($1k for me).

Im curious as well, if its worth jumping into before, or like previously mentioned, wait til August before jumping back into the market... either way, long term, it probably wont make a HUGE difference, but could be a subtle difference down the road.

LONG TERM it makes about zero difference.... here's what does make a difference --- BEING OUT OF THE MARKET.

It's a proven numerical fact that GAINS in the market are only actually made a few DAYS in any given year -- the rest of the year it moves two forward - one back - three back - two forward.... BUT a couple times a year there are nice big PERCENTAGE moves and if you're out on those days - you've lost the largest percentage for that particular year.

Coke has split 10 times since 1919.... do the math of how many shares you'd have starting with ONE share in 1919... and splitting 2 for 1 ten times - and now once again so 11 times....

1

2

4

8

16

32

64

128

256

512

1024

2048

And this last time


4096


None of us would have lived that long -- but it begins to be the law of large numbers --- do the math had you bought 100 shares back at 256 !

[GregWeld]

Okay -- but here's the REAL splits for Coke since 1919.... so my math is TAME compared to the actual numbers!


The Coca-Cola Co. is seeking its first stock split in 16 years. Here's a look at the beverage maker's 10 other stock splits in history, along with the price of the stock before the split.

1919 – Shares begin trading at $40 per share.

1927 – 2-for-1 split – $199.50

1935 – 4-for-1 split – $290

1960 – 3-for-1 split – $153.75

1965 – 2-for-1 split – $146.50

1968 – 2-for-1 split – $155

1977 – 2-for-1 split – $73.75

1986 – 3-for-1 split – $117

1990 – 2-for-1 split – $76.75

1992 – 2-for-1 split – $82.88

1996 – 2-for-1 split – $81.75

2012 – Coke seeks 2-for-1 split. Shares closed at $74.12 Tuesday