9th stock split of AFLAC
Last week AFLAC Incorporated (AFL) board has approved a 2-for-1 stock split in the form of a 100% stock dividend. This marks 9th split of the company’s stock since listing on the NYSE in 1974, and the 1st in 17 years.
The stock split is payable March 16, 2018 to shareholders of record on March 2, 2018.
CEO Daniel P. Amos stated:
“I am pleased with the Board’s action to split Aflac Incorporated’s stock. As you’ll recall, this follows a year of strong share price performance and is on top of our announcement of the Board’s action to approve an increase in the first quarter cash dividend of 15.6%. This is the ninth split of the company’s common stock since listing on the NYSE in 1974 and the first in 17 years. This split enhances the liquidity of our shares, which is in addition to our efforts to increase shareholder value.”
What does a split means? AFLAC announced a 2 for 1 split, meaning for each share of AFLAC owned pre-split, the shareholder now owned 2 shares. When a company splits its shares, the market capitalization before and after the split takes place remains the same. In normal words, the shareholder now owns more shares but each are valued at a lower price per share.
Why does a company decide to split their shares, you ask. Well companies perform a stock split, to lower the stock price to attract a wider range of buyers. And here human psychology also play a roll, because most investors are more comfortable purchasing, say, 100 shares of €10 stock as opposed to 10 shares of €100 stock. In other words, a stock split makes a stock more attractive.
And if the demand increases, the share price will also increase 😉 Of course the underlying fundamentals has to be/remain good. By deterioration fundamentals, this effect will normally not take place.
A stock split is in my opinion a strong signal from the management, that the future looks bright.
Many companies enjoy big gains when they employ a stock split. Forbes calculated that Aflac after implementing a two-for-one split in 2001, experienced gains of 73 percent.
Lets look at AFLAC stock split history from start to finish.
|October 18, 1976||5-4|
|June 4, 1985||3-2|
|March 3, 1986||4-3|
|February 3, 1987||2-1|
|June 15, 1993||5-4|
|March 18, 1996||3-2|
|June 9, 1998||2-1|
|March 19, 2001||2-1|
|March 16, 2018||2-1|
We can calculate that an original position size of 100 shares would have turned into 7500 after the latest split. Well this is great, just by downing nothing!
Okay, AFLAC will split its shares on March 16. When the markets opens again on the following Monday, March 19, my number of shares will have doubled and the price will have been cut in half. If we take a look at my Vrijheid Fonds, we see that at this moment I own 24 shares, with a price of $88.92 (end price February, 20 2018). The total value of my AFLAC investment it thus $2,134.08
On Monday March 19 my Vrijheid Fonds will consist of 48 shares. And when the share price will not fluctuate till March 19, the share price will be $44.46. But hey, we all know this will not be the case. So we have to see what the stock price will be on that day (I can’t look into the future unfortunately).
My projected annual total amount (2018) from my shares of AFL will not be influenced by this split and will be €34 ($42) after taxes.
I’m happy with this split. What do you think about stock splits? Are you happy with the stock split of Aflac? I like to hear from you.