Tech giant Apple (NASDAQ: AAPL) has broken all the rules of stock market investing. Its big returns in 2019 therefore far in 2020 contradict those who’ve stated that the iPhone maker’s best days lag it. Its market capitalization of almost $1.8 trillion seems too large for further gains, yet Apple keeps breaking the law of great deals to push ever greater.

Now, Apple has actually when again contradicted convention, this time with its stock. In an era in which stock divides have almost disappeared, the Cupertino-based tech giant said that it would divide its shares 4-for-1. Although the decision would not have appeared out of place as recently as a few years back, it now is stimulating a lot of discussion about whether more business will follow suit with stock splits of their own.

Hardly an unprecedented move

Apple is no complete stranger to splitting its shares. It has done so on four prior occasions, as you can see listed below:

Efficient Date of Split

Split Ratio

100 Shares in 1986 Would Now Be:

June 16, 1987

2-for-1

200 shares

June 21, 2000

2-for-1

400 shares

Feb. 28, 2005

2-for-1

800 shares

June 9, 2014

7-for-1

5,600 shares

Aug. 31, 2020 *

4-for-1

22,400 shares

Information source: Apple investor relations. * Newest stock split is still pending as of publication date.

When selecting to split its stock, Apple normally followed the rules that prevailed in the more comprehensive stock exchange at the time. Apple’s first stock split in 1987 came after the stock rate had actually reached roughly $80 per share. A 2-for-1 split gave Apple lots of breathing room to avoid triple-digit share rates. When Apple stock next came near the $100 mark in 2000, another split sent the share rate back downward. Similarly, Apple traded in the low $80s in 2005 when it did its third 2-for-1 stock split.

A modification in split technique

Already, however, companies had actually started to change their stance toward stock divides. Numerous companies no longer felt it essential to keep their share prices at relatively low levels. As an outcome, when Apple when again approached $100 per share, the tech giant did nothing. The stock price continued to move ever higher; it was disrupted briefly by the financial crisis, but eventually relocated to $700 per share. After 2005, Apple adopted a brand-new technique. Despite the fact that the stock climbed into the triple digits by 2007, the business didn’t utilize its previous playbook and rather allowed its shares to continue to value. Regardless of significant volatility both before and throughout the financial crisis in 2008 and 2009, Apple quickly rebounded and skyrocketed to as much as $700 per share by 2014.

At that point, Apple broke with the new custom and chose to split its stock again. The business trotted out the normal description of making shares quicker available to financiers. Yet as it happens, the split likely showed critical in permitting Apple to enter into the Dow Jones Industrial Average (DJINDICES: ^ DJI). The price-weighted average would’ve been hard-pressed to accept Apple’s commanding influence if its stock cost had actually stayed at $700 or more. After an unusual 7-for-1 split, shares in the low triple digits were quite sensible to factor into the Dow’s computations.

Image source: Apple. Another game-changing relocation

Six years later, Apple has as soon as again defied convention. Even as tech rivals push headlong into four-digit area, the mobile phone giant has returned to its usual modus operandi, choosing a 4-for-1 stock split that should return its stock price to ideal around $100 per share. Once again, Apple argues that it desires its stock to be more available to a more comprehensive base of investors– even though innovations like odd-lot trading and fractional shares have actually made stock rate much lesser than it was previously in Apple’s history.

What’s surprising is that there was no evident ulterior intention for doing the split. Sure, Apple has without a doubt the highest share rate in the Dow, so it has a 10% weighting in the average. Yet the company’s huge market cap provides it similarly heavy weight in other indexes. In the S&P 500, for example, Apple’s weight is approaching 6%– and the S&P is a much wider benchmark than the Dow.

What Apple’s stock split truly means for financiers

Stock divides make no genuine distinction in the value of the business. After the split, investors will own four times as lots of shares, with a share rate approximately a quarter of what it was prior to the split.

However, financiers are taking the news as an indication of confidence that Apple can continue to see its stock increase. For a business as huge as Apple has actually become, that’s a pleasant surprise– and it’s one that might move Apple’s share price ever greater even after the split takes effect in late August.