Do Stock Splits Make Sense Anymore?

Google just split its shares, but does it really make sense for most companies?

Apr 7, 2014 at 8:05AM

Last week, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) split its stock into two classes, issuing a stock dividend and creating a new class of non-voting stock to keep control in the hands of the tech giant's founders. But the Google split has raised the broader question of whether stock splits are really necessary.

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at how stock splits have changed over the years. Historically, the need to buy and sell stock in 100-share lots made share price important, with splits allowing stock prices to stay in ranges where 100 shares would be affordable for many investors. But now that you can buy single shares of stock, many companies have chosen not to split at all. Dan points to Priceline.com (NASDAQ:PCLN), Chipotle Mexican Grill (NYSE:CMG), and Intuitive Surgical (NASDAQ:ISRG) as examples of high-priced stocks that haven't done share splits. Dan concludes that when you don't have a corporate purpose like Google's attempt to keep voting control, stock splits aren't nearly as important as they used to be.

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Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Chipotle Mexican Grill, Google (A shares), Google (C shares), Intuitive Surgical, and Priceline.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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