This article was updated on March 15, 2017, and was originally published on Oct. 4, 2016.
The invention of the first commercially practical incandescent light bulb changed the world, and building on that, General Electric (GE 3.40%) founded an industrial empire that eventually spanned many sectors of the economy. With a history that includes not only manufacturing but also high finance, energy, and healthcare applications, General Electric has become the iconic American company in many people's eyes. It has also produced a history of solid performance, producing strong returns and paying reliable dividends to its investors. Throughout the 20th century, General Electric also executed stock splits on a fairly regular basis. Yet those splits have stopped coming, and some investors want to know whether the shares will ever split again.
Below, we'll look more closely at the history of GE's stock splits and speculate on whether more splits could come in the near future.
Image source: General Electric.
GE stock splits
Here are the dates and split ratios for the stock splits General Electric has executed in the past:
|
Date of Split |
Split Ratio |
|---|---|
|
1926* |
4 for 1 |
|
1930* |
4 for 1 |
|
June 11, 1954 |
3 for 1 |
|
June 7, 1971 |
2 for 1 |
|
June 1, 1983 |
2 for 1 |
|
May 22, 1987 |
2 for 1 |
|
May 13, 1994 |
2 for 1 |
|
May 9, 1997 |
2 for 1 |
|
May 5, 2000 |
3 for 1 |
Data source: General Electric investor relations. *Exact date not specified.
As you can see, General Electric has made a habit of doing stock splits when conditions warrant. That has been fairly frequent because of GE's strong performance, which includes average annual total returns of more than 12% over the past 40 years.
When General Electric historically did stock splits
General Electric's history of stock splits goes so far back that finding reliable price data is a challenge. However, looking at more recent moves sheds some light on what has motivated GE to split its stock. During the late 1960s, GE stock had traded above $100 per share on a couple of different occasions, but by 1971, it became clearer that it would sustain that level for the foreseeable future, spurring a 2-for-1 split that pulled GE shares back down into the $60s. Sluggish market conditions throughout much of the 1970s kept General Electric's stock price in check, but the recovery in the early 1980s again sent shares into triple digits and prompted 1983's 2-for-1 split. The same events played out in 1987, 1994, and 1997, yet each time, GE stock continued its upward climb and made future splits necessary.
By the late 1990s, General Electric was rising so quickly that it didn't immediately make a move when its stock climbed above $100 per share. Instead, it waited a while longer. When the stock price hit $150, GE pulled the trigger on a 3-for-1 split that pulled shares down into the $50s once again.
A tough decade for GE
Since 2000, General Electric hasn't split its shares. The reason is simple: Its stock price has never warranted such a move, and the decade of the 2000s in particular was extremely tough for the company. The bear market of 2000 to 2002 slashed 40% off General Electric's share price, wresting away its former status as the world's most valuable company by market capitalization. Even during the boom times of the mid-2000s, GE didn't fully participate -- in part because of its high dividend yield and in part because of its transformation into a company that relied more heavily on finance.
GE's financial arm cost it dearly during the recession of 2008. The financial crisis left General Electric extremely vulnerable, sending its share price into the single digits for a brief time. A major dividend cut caused many investors to sell their shares, and many saw GE as a has-been of American industry.
Will General Electric shares ever split again?
Since 2009, General Electric has bounced back aggressively. Its stock price is now once again around $30 per share, having quintupled from its worst levels during the financial crisis. Internally, GE has aggressively moved to reduce its exposure to the financial industry, instead reemphasizing its industrial history by taking advantage of favorable conditions in the aerospace, healthcare, and renewable energy sectors to assert its dominance in innovation and manufacturing.
Yet GE stock isn't even close to a level that would require a stock split, based on its past practice. Even if things keep going well, it will take considerable time for the stock to triple once again, and even then, GE shares wouldn't quite be back to the triple-digit levels that have spurred splits in the past.
General Electric investors shouldn't completely rule out the idea that the stock might split at some point in the future. Yet neither should they count on a split happening anytime soon. Given the tough times the company suffered, General Electric will have to keep working hard in order to give its shareholders the long-term returns they've come to expect.
