Why Walmart split its stock
Walmart stock splits used to be a regular event — there were six of them just between November 1980 and June 1990. But it's now almost 25 years since the last one, in March 1999.
Why it matters: Nowadays, almost every brokerage, including Walmart's own Associate Stock Purchase Plan, allows the purchase of fractional shares, making a company's nominal share price less important than ever.
The other side: Walmart's own press release this week announcing a new stock split quotes CEO Doug McMillon as saying that "Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates."
- Walton stepped down as CEO in February 1988, when an entry-level Walmart associate would have had to work more than 8 hours to amass enough pre-tax income to buy a single share.
- After this month's stock split, that ratio is going to plunge to an all-time low of less than 4.
The bottom line: The stated reason for splitting the stock doesn't seem to make a lot of sense — especially given that the split is going to significantly dilute Walmart's contribution to the Dow Jones Industrial Average.