The Dow’s editors at S&P Dow Jones Indices are the ultimate arbiters of that decision – and it’s not a simple one to make.Īmazon is a member of the market's consumer discretionary sector. That said, while the Amazon stock split might make Amazon a more realistic addition to the Dow, don’t consider its inclusion automatic. Adding AMZN at $2,100 would turn the Dow into the “Amazon & Friends Average.” UnitedHealth Group ( UNH (opens in new tab)), at roughly $500 a share, holds the greatest weight in the average today. Indeed, at $2,100 a share, Amazon stock would skew the average into meaninglessness. That price-weighted construction effectively shuts out companies with lofty share prices, such as AMZN. The S&P 500 and Nasdaq Composite determine their weights by market capitalization (stock price multiplied by number of shares outstanding.) But the Dow – created way back in 1896 – is weighted by the company’s stock price. The 15 Best Stocks to Buy for the Rest of 2022 That's because the blue-chip barometer isn't built like the other two major indexes. Amazon to the Dow?īut perhaps the most interesting perceived benefit of the split is that Amazon could be tapped for the 30-stock Dow Jones Industrial Average one day. The company bought back $2.12 billion of its shares under that plan.īy reducing its share count, Amazon's remaining shares will have greater perceived value by dint of both their increased scarcity and greater claims on future cash flows. It replaces Amazon's previous $5 billion stock repurchase authorized in 2016. However, a $10 billion share repurchase program, also announced back in March, is another matter entirely.
In this case, shareholders will effectively be swapping a $20 bill in return for 20 $1 bills. That's because a split is essentially the same thing as making change. And that continues to be true even in an age when brokers are happy to sell clients fractional shares for free.Īfter all, splits might give traders and investors more flexibility, but they have absolutely zero impact on a company's fundamentals, prospects or its shares' valuation.
"This split would give our employees more flexibility in how they manage their equity in Amazon and make the share price more accessible for people looking to invest in the company," an Amazon spokesperson said.ĭespite what the textbooks say, the market loves stock splits.
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