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Many public companies have tried to use stock splits in order to create an increased demand for their stock from the average investor who may

Many public companies have tried to use stock splits in order to create an increased demand for their stock from the average investor who may have been scared away by the current high trading price of one share of stock. The hope for the future is that, following a stock split, the demand will increase and eventually the stock price will rise and outperform the market as a whole. There are various studies and articles out there with different opinions on whether or not a stock split is good for the investor in the long term. Research some articles and at least one example of a company that had a stock split. Comment on:

1. What do the various studies say about the performance of the stock in the long term after a stock split?

2. Lowes company has had a stock split, analyze the stock price before the stock split, after the stock split and the current stock price as of today. Based on the average market increase over the years, what would you say about this companys stock performance after the stock split?

Date

Action

Shares

Shares After Split

Closing Price Before Split

Oct 1961

Bought 100 Shares

100

-

-

April 1966

100% stock dividend (2 for 1)

100

200

41.50

Nov 1969

Stock Split (2 for 1)

200

400

69.50

Nov 1971

50% Dividend (3 for 2)

400

600

71.25

July 1972

33 1/3% Dividend (4 for 3)

600

800

82.00

June 1976

50% Dividend (3 for 2)

800

1,200

40.50

Nov 1981

Stock Spilt (3 for 2)

1,200

1,800

19.88

April 1983

Stock Split (5 for 3)

1,800

3,000

40.25

June 1992

100% Dividend (2 for 1)

3,000

6,000

39.25

April 1994

Stock Split (2 for 1)

6,000

12,000

64.50

June 1998

Stock Split (2 for 1)

12,000

24,000

83.69

June 2001

Stock Split (2 for 1)

24,000

48,000

72.55

June 2006

Stock Split (2 for 1)

48,000

96,000

60.67

3. Do you think stock splits are good for the investor? Do you think they ultimately result in better performance, worse performance or no difference in performance over the long term?

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