Alphabet Stock Just Split – What Does It Mean and How Does It Affect Your Investments?

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When Alphabet stock split earlier this month, many investors saw their net worth rise rapidly. The 20-to-1 stock split meant that each share of Alphabet, Google’s parent company, was now worth 20 shares at 1/20 the price. However, a stock split makes each individual stock more affordable for investors. This usually results in more purchases, which leads to an increase in inventory. In the case of Alphabet, the stock rose 9% in the secondary market after the split.

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This means that people who held one share of Alphabet at $2,752.88 now had 20 shares, each worth $137.64. But the 9% jump resulted in a gain of more than $15 for each share, or $300 for 20 shares.

But what exactly is a stock split?

As the name suggests, a stock split occurs when each stock is divided into multiple stocks. For each share a shareholder owns, he will receive additional shares. In the past, stock splits happened frequently when a stock reached $100. Today, they rarely occur – and usually when a stock’s price rises rapidly and reaches territory where it would be unaffordable for many investors.

A four-for-one stock split means that each investor would get three additional shares, each worth a quarter of the original stock price. Stock splits can be particularly relevant for stocks that pay dividends. In a four-to-one split, for example, investors who were receiving dividends on one stock would now receive dividends on four stocks.

Stock splits generally do not affect a company’s market capitalization, except for any increase the stock may experience after the split due to more buyers being able to afford it. to buy shares. S&P 500 stocks tend to gain 5% in the year following a split, with a 2.5% rise occurring immediately, The Wall Street Journal reported.

However, in today’s investing world, where many apps allow investors to buy fractional shares, splits have lost much of their relevance, which is why we don’t see them as often.

When Stocks Divide Unevenly

Sometimes a company splits a stock due to organizational changes within the company. For example, last Tuesday AT&T announced that it would spin off its WarnerMedia division and merge ownership with Discovery. As part of the company’s spin-off, AT&T shareholders received 0.24% of a Warner Bros. share. Discovery for every AT&T stock they held.

AT&T also decided to cut its dividend payments from $2.08 per share to $1.08 per share. As a result, instead of seeing AT&T stock rise following the split, AT&T stock fell 4%.

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What should investors do when a stock is split?

Bearing in mind that most stocks go up after a split, now might be a good time to hold on to your investments. However, you might want to assess your portfolio for its diversity, to make sure it’s not too biased towards fractional investing. You may also want to talk to your financial advisor about the best money moves to make with your new, growing portfolio.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketer with interests in finance, e-commerce, technology, and real estate. His long list of publishing credits includes Bankrate, Lending Tree and Chase Bank. She is the founder and owner of GeekTravelGuide.net, a travel, technology and entertainment website. She lives in Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten and three lizards of different sizes and personalities – plus her two children and her husband. Find her on Twitter, @DawnAllcot.

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