When stocks start trading north of the $1,000 mark, investors often wonder if a stock split may be coming. A stock split reduces the price of a stock, making it easier for investors to buy without having to purchase fractional shares, which aren't available on all platforms and for all types of stocks.
Healthcare giant Eli Lilly (LLY -1.37%) has a share price that's comfortably above $1,000, and these days is closer to the $1,200 mark. It's been a tremendous growth stock over the years, and its valuation is north of $1 trillion. A great way to cap off its impressive growth might be with a stock split before the end of the year. But here's why I don’t think that will happen.
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The company last did a stock split in 1997
There are some companies that love to do stock splits, while others aren't nearly as keen. It's been 29 years since Eli Lilly last did a stock split, when it did a 2-for-1 split back in 1997. That was the fourth split in its history; the others took place in 1995, 1989, and 1986. For a while there, Eli Lilly seemed to love stock splits.
However, stock splits are discretionary. Management may not choose to undertake them, even if the stock price becomes incredibly high. Eli Lilly could easily do a 10-for-1 split today, and its share price would still be above $100. It hit the $1,000 mark last year, and CEO David A. Ricks, who has been at the helm since 2017, hasn't announced a stock split. If a split was going to happen, I believe it would have taken place by now.
NYSE: LLY
Key Data Points
Eli Lilly is a solid stock to own for the long haul, regardless of whether it does a stock split
A stock split doesn't make investors any richer. They will own more shares, but the average share price will also go down; the investment value will remain unchanged.
The good news, however, is that for investors who are willing to hang on to Eli Lilly stock for the long term, it can still be a solid buy today. It's a dominant company in the anti-obesity drug market, and its broad business can ensure it continues growing for the foreseeable future.
Although it may not be a cheap stock to own right now, it can be a solid growth investment to hang on to for years. Plus, it can generate a lot of dividend income as it has aggressively raised its payouts in recent years. Eli Lilly is the type of growth stock that investors can buy and forget about.
