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Mladen Antonov / AFP via Getty Images
Apple’s 4-for-1 stock split will greatly diminish its influence on the Dow Jones Industrial Average, where the iPhone maker now has the highest weight and the biggest positive influence this year.
Apple (ticker: AAPL), whose shares ended Thursday at $ 384.76, will drop to 18th in the index weight from the first after the split, to be held in late August. Apple now has a 10% weighting on the Dow, and that will drop to 2.7% based on stock prices on Thursday, according to S&P’s D&Jones.
The division will cut Apple’s stock price to around $ 96 based on Thursday’s close, but the stock is considerably higher after stronger-than-expected earnings for the June quarter reported on Thursday night.
In Friday morning trading, Apple rose approximately 6%, or $ 24, to $ 408.91, representing a gain of nearly 165 points on the Dow, given that each $ 1 change in share price of a component raises the index in approximately 6.86 points. The Dow overall, however, fell 0.6%.
The Dow, which dates back to 1896 in its current form, has a weighted price, which means that higher priced stocks have the biggest impact on the index. The value of the index is calculated by adding the share prices of the 30 components and then multiplying it by 6.86. This is in contrast to the S&P 500 and most other major indices that are weighted by the market value of each component.
After Apple split, the highest priced share in the Dow would be UnitedHealth Group (UNH) at $ 305, followed by Home Depot (HD) at $ 266.
Apple’s division may not help the performance of the Dow, which has been affected by a very modest weighting in the shares of the new economy and a major industrial component. The index was down 7.8% yoy through Thursday, compared with a 0.5% gain in the S&P 500 index. During 2019, the Dow followed the S&P by approximately 6 percentage points based on total performance.
So far this year, Apple’s 31% advance through Thursday, combined with its high weighting, has added 546 points to the Dow, which is at 2,225 points at 26,313. That gain at Apple has added about 2 percentage points to the performance of the index.
The Dow has five technology components, but only two, Microsoft (MSFT) and Apple, have contributed a lot to the index’s gains in recent years. The other three are Intel (INTC), Cisco Systems (CSCO) and IBM (IBM).
Weighting the prices of the index has made it difficult to add high-priced stocks like Alphabet (GOOGL) or Amazon.com (AMZN), as they could overwhelm the impact of lower-priced stocks.
The Dow has been hit this year by losses in stocks such as Exxon Mobil (XOM), Raytheon Technologies (RTX), JPMorgan Chase (JPM) and Boeing (BA).
Write to Andrew Bary at [email protected]
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