Tech behemoth Alphabet (GOOGL 0.35%) (GOOG 0.37%) is next in line for a stock split. Alphabet, the parent company of Google, is getting ready to shower investors with 19 extra shares in their account for every one share they owned before the cut-off date. This is all due to a 20-for-1 stock split that will take place after market close on Friday, July 15.
If you're wondering how Alphabet's 20-for-1 stock split will impact your portfolio, we've compiled a few things you should know so you won't be left in the dark.
Image source: Getty Images.
Alphabet's 20-for-1 stock split means more shares for investors
Alphabet shareholders approved a 20-for-1 stock split at the company's annual meeting on June 1. All shareholders on record as of July 1, 2022 will receive 19 extra shares of Alphabet stock for every one share they own. The stock split will take place after the market close on July 15.
Although waking up to additional shares of stock in your account sounds like a dream, it's not as glamorous as it appears. A stock split slices the shares you already own into bite-sized pieces. If you have 1 share of Alphabet before the stock split, you'll have 20 shares of Alphabet in your account after the 20-for-1 stock split.
A stock split leads to more shares in your account, but it doesn't automatically increase the value of your portfolio. If shares of Alphabet are worth $2,000 per share before the stock split, each share would be worth $100 per share after a 20-for-1 stock split, assuming the stock price stays the same. The reduced stock price makes it easier for average investors to get their hands on a whole share of Alphabet stock.
Calculate how many shares of Alphabet you'll own
There's no need to guess how many shares of Alphabet stock you'll own after the stock split; the company tells you in advance how many shares you'll receive.
Below, we use Alphabet's 20-for-1 ratio to determine how many shares you'll own after the big event. The numbers on the left show the number of shares you might have had on record as of July 1. The numbers on the right represent how many shares you will see in your account after the stock split.
- 1 share of Alphabet stock = 20 shares
- 5 shares of Alphabet stock = 100 shares
- 10 shares of Alphabet stock = 200 shares
- 15 shares of Alphabet stock = 300 shares
- 20 shares of Alphabet stock = 400 shares
Don't forget about fractional shares
Fractional shares have made it possible for anyone to own shares of their favorite stock. Instead of paying a four-figure price tag per share to own Alphabet or any other high-priced stock, you can choose a dollar amount you want to invest and get a fractional share. The good thing is that fractional shares won't disqualify you from participating in a stock split. Your fractional shares can turn into whole shares of Alphabet after a stock split.
Calculating how many shares you'll own after a stock split can be confusing if you own fractional shares. We've done the math for you so you can know what to expect after Alphabet's stock split.
- 1/2 share of Alphabet stock = 10 shares
- 1/4 share of Alphabet stock = 5 shares have a
- 1/5 share of Alphabet stock = 4 shares
- 1/10 share of Alphabet stock = 2 shares
- 1/20 share of Alphabet stock = Congrats! You have one whole share of Alphabet stock
Manage your expectations about stock splits
It's easy to get caught up in the stock split hype and place all of your attention on the number of shares you will receive in your account. However, the most important numbers you should focus on are a company's financial metrics. These numbers will give you more insights into a company's performance and its ability to build a sustainable profitability model over the long term. A stock split in itself is not a sign of financial health. Be sure to do your research and choose stocks that align with your goals to ensure you're getting a real deal from your investments.
