Demand for commercial airliners has never been higher, and Boeing (BA 2.71%) has claimed its fair share of orders from airlines and other purchasers flush with cash from the industry's success. Just in 2017 alone, Boeing's share price has soared by 70%, and with a single share fetching more than $260 at this writing, the stock has more influence within the price-weighted Dow Jones Industrial Average (^DJI +0.50%) than any of the other 29 components in the Dow.
Many investors have thought that Boeing would look closely at doing a stock split because of the huge rise its shares have seen lately. Yet longtime shareholders have waited more than 20 years without seeing a split, and a few skeptics believe that Boeing might never split its stock again. Let's look more closely at Boeing to see whether 2018 is likely to bring a change of heart from the aircraft manufacturing giant.
When has Boeing done stock splits in the past?
Beginning early in its history, Boeing has shown no reluctance to split its stock when it served the company's purposes. A healthy average annual return of 14% over the past 45 years has caused Boeing's stock to enjoy extensive share-price gains, and rather than letting the stock climb unchecked, the aerospace giant instead employed the then-common tactic of splitting its shares on a fairly regular basis.
|
Split Date |
Ratio |
100 Shares in 1950 |
|---|---|---|
|
May 9, 1952 |
3 for 2 |
150 shares |
|
May 7, 1954 |
2 for 1 |
300 shares |
|
July 13, 1956 |
2 for 1 |
600 shares |
|
May 3, 1966 |
2 for 1 |
1,200 shares |
|
Aug. 11, 1977 |
2 for 1 |
2,400 shares |
|
March 12, 1979 |
3 for 2 |
3,600 shares |
|
March 14, 1980 |
3 for 2 |
5,400 shares |
|
May 10, 1985 |
3 for 2 |
8,100 shares |
|
May 12, 1989 |
3 for 2 |
12,150 shares |
|
May 18, 1990 |
3 for 2 |
18,225 shares |
|
May 16, 1997 |
2 for 1 |
36,450 shares |
Data source: Boeing investor relations.
When you look back at what prompted stock splits from Boeing, the company seemed to be slightly more aggressive than many of its peers in implementing splits to keep share prices down. Just about as soon as the stock climbed above the $100 per share mark in the mid-1990s, Boeing started looking at doing a 2-for-1 split. Previous moves to do less transformative 3-for-2 splits came at even lower share prices, with the $50 per share mark seeming to be a sweet spot that Boeing targeted for its post-split level in the 1980s. Earlier still, Boeing implemented stock splits at even lower price levels.
Splitting shares more frequently made sense in the 20th century. The current ubiquitous presence of discount brokerage companies hadn't yet fully established itself, and the historical mentality that investors had to trade stocks in multiples of 100 shares hadn't yet started to fade. The idea of having to invest in $26,000 increments to buy a single 100-share lot of Boeing stock would have prompted outrage from typical investors, who would have demanded greater trading liquidity. Now, investors routinely buy and sell fewer than 100 shares of high-priced stocks at a time. As a result, Boeing hasn't felt much pressure to do a split in the past 20 years.
Image source: Boeing.
Is 2018 the right year for a Boeing stock split?
Even if the trading pressure to split its stock has largely disappeared, there is one reason why Boeing might need to consider such a move in the coming year: its position among the 30 stocks of the Dow Jones Industrials. Boeing's current share price gives it the highest weight of any Dow stock, making up nearly 8% of the average. That's more than double what its influence would be if the Dow were equal-weighted, and Boeing would have even less of an impact if the Dow were weighted by market capitalization.
Boeing might nevertheless not respond to that pressure by making a simple retort: Several other companies in the Dow with high-priced shares haven't taken action recently to do stock splits. Currently, four Dow stocks have share prices above $200, and half of the Dow 30 boast prices in the triple digits. Those responsible for overseeing the Dow Jones Industrial Average might implement requirements at some point in the future, but barring that, Boeing could easily argue that it shouldn't have to make a move without its peers facing the same mandate.
Purely from a share-price perspective, 2018 would be a good time for Boeing to split its stock. Yet the same could have been said for 2017 and other times in the past. At this point, there's no reason to believe Boeing will change its past practice over the last 20 years without some outside influence making it necessary.
