After more than 20 years and a 5,000% increase in returns, Amazon (AMZN 1.66%) is splitting its stock again. At over $3,000 a share, the e-commerce giant is one of the most expensive stocks on the market. The split will cause the stock to trade at around $150 per share.
Of course, that means nothing to investors who will receive 20 times the number of shares they currently own, meaning nothing changes in their portfolios, but splits are generally seen as a bullish signal and a shareholder-friendly move.
Image source: Getty Images.
But Amazon is a much different company now than it was in 1999, the time of its last split, a veritable behemoth in size and scope. Stock splits and stock buybacks, like the $10 billion worth Amazon ordered up at the same time that it announced the split (something Amazon also hasn't done in a decade), could be how Amazon helps return more value to shareholders.
Amazon's move also comes after several other high-flying tech names, including Alphabet, Apple, and Tesla, announced stock splits of their own.
While Warren Buffet's Berkshire Hathaway remains the highest-priced stock right now at over $504,000 a share, there are five other companies whose stock prices exceed $1,500 each and would seem to be good candidates to also engineer a stock split.
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1. NVR (Current price: $4,854 per share)
The most expensive stock on the market after Berkshire, NVR (NVR 0.76%) builds homes under the Ryan Homes brand and offers mortgages for homebuyers through its NVR Mortgage Finance subsidiary.
It is the fourth-largest homebuilder in the U.S. by revenue behind D.R. Horton, Lennar, and PulteGroup, reporting almost $9 billion in revenue, almost all of which came from its homebuilding activity. Riding the housing boom brought on by the pandemic, sales rose 19% last year as it closed on 21,540 homes, 9% more than the prior year.
NYSE: NVR
Key Data Points
NVR has never split its stock since going public in 1993, so there doesn't appear to be any reason it would begin now. But it does maintain a regular stream of buyback authorizations, having announced a new $500 million program last month, which it says "is a continuation of the stock repurchase program that began in 1994 and is consistent with NVR's strategy of maximizing shareholder value."
2. Seaboard (Current price: $3,927 per share)
Seaboard (SEB 2.65%) is arguably best known as being one of the largest pork processors in the U.S., ranking third in hog production and fourth in processing, but it actually generates the lion's share of its revenue from Seaboard Overseas and Trading Group, a global trading company that transports and markets some 14 million metric tons of wheat, corn, soybeans, soybean meal, and other commodities annually. In 2021, the business generated revenue of $5.1 billion, or 56% of the total.
In reality, Seaboard is more of a conglomerate. It also has a container ship division, a sugar and alcohol business in Argentina, an energy generation unit in the Dominican Republic, and a turkey business through a 50% ownership stake in Butterball. It also produces jalapeno peppers in Honduras.
Seaboard has been around since 1918 but went public in 1959 through a merger with Hathaway Industries. It's a thinly traded stock on the American Stock Exchange, and the Bresky family controls 77% of the stock. Like NVR, Seaboard's shares have never split, and because of the controlling interest of the Breskys, it does not seem like it will split its stock anytime soon.
Image source: Getty Images.
3. Booking Holdings (Current price: $2,202 per share)
Back when it was called Priceline.com, Booking Holdings (BKNG +0.66%) split its shares once, but it was a 1-for-6 reverse split. The travel company had been in difficult straits in 2000 as the dot-com boom imploded, but by the time the reverse split was done, Priceline was already on its way back to health.
Rather than a need to hold off a delisting, the online travel agent said the split was done to better reflect its health and growth and make it a more tradeable issue. Today, Booking Holdings is one of the leading travel agencies and it got its name after Priceline acquired Booking.com, a Dutch online travel site, in 2005.
While a stock split might seem a good way to reinvigorate shares by making them available to the small retail investor, Booking Holdings seems in no hurry to lower its price.
4. AutoZone (Current price: $1,971 per share)
Auto parts retailer AutoZone (AZO 1.58%) is yet another company that split its stock a long, long time ago -- twice in the 1990s at 2-for-1 -- and then never bothered to revisit the matter again. It's unlikely to do so going forward either.
NYSE: AZO
Key Data Points
AutoZone much prefers to buy back its stock, maintaining an aggressive share purchase program over the years. In the just-completed fiscal second quarter, the auto parts retailer repurchased $1.6 billion worth of stock and still has almost another $1 billion available to it.
But considering AutoZone's voracious buyback appetite, there seem to be few options open to it other than splitting its stock. The single-minded focus of management in reducing the share count and bolstering the value of the remaining shares has left the auto parts retailer just 20.5 million shares outstanding. Ten years ago, it had more than double that number, and there was triple that amount almost 15 years ago. As it's almost running out of shares to buy back, a stock split could be just what it needs.
Image source: Chipotle Mexican Grill.
5. Chipotle Mexican Grill (Current price: $1,555 per share)
We're back to stocks that have never split their shares with Chipotle Mexican Grill (CMG +1.29%), and that's because it views splits as a form of financial engineering that's not in the best interests of shareholders. CFO John Hartung told analysts back in 2008, "We don't think [splits] really does anything to add to shareholder value."
Chipotle has long looked to improve its business as the primary means of incrementally boosting returns to investors over the long haul. Even after foodborne illness outbreaks looked like they were going to seriously damage the Mexican food chain's reputation, it resisted the urge to use its balance sheet to artificially boost its value or its stock price.
That's the kind of management investors should be seeking out, and while it may be exciting when a split occurs, it's really little more than window dressing. How a business is run is the ultimate arbiter of value, and investors should be laser-focused on those companies that do it best.
