Are Stock Splits Good? Here's the Data

Investors often get excited when a major company announces a stock split. But are stock splits good for investors?

What about over a longer time period? Let's take a look at Amazon's performance from one year before its stock split until the end of October 2022. As you can see in the chart below, there's a dip right after the split (marked by the "S" icon), but that coincided with a dip in the entire market.

Google's 2022 stock split

On Feb. 1, 2022, Google (GOOGL -0.95%) announced a 20-for-1 stock split. Shares were trading at $2,752.88 on the date of the announcement.

Google outperformed the market over the next month. Its share prices dipped by 2.6%, compared to a 5.3% drop for the S&P 500. But between the Feb. 1 announcement and the July 15 stock split, Google share prices decreased by 18.8%. The S&P 500 didn't lose quite as much, with its value falling by 15.0%.

In the months after the stock split, Google didn't keep up with the S&P 500.

However, if we take a look at Google's performance beginning one year before its split, we can see that it has underperformed the market over that period, though maybe not as consistently as the short-term results may imply. The chart below shows Google's returns over that period compared to the S&P 500.

Shopify's 2022 stock split

E-commerce platform Shopify announced a 10-for-1 stock split on April 11, 2022, when shares were trading at $617.40.

The announcement didn't help the stock's performance, as the price plummeted by 48.4% over the next month -- far more than the S&P 500, which suffered a 10.8% decline.

There was a minor improvement between the announcement and the stock split. Overall, Shopify's share price went down 43.3% from the April 11 announcement to the stock split on June 28. The S&P 500 dropped by 13.4% during that time. In the first three months after its stock split, Shopify's share value continued to decline.

It's doubtful that the stock split carries much blame for Shopify's performance. Zooming out, we can see that after some success in 2021, its share price began dropping rapidly in early 2022.

Apple's 2020 stock split

Since going public in 1980, Apple (AAPL +0.04%) has split its stock several times. The most recent Apple stock split was a 4-for-1 split announced on July 30, 2020. The share price on the date of the announcement was $384.76.

The lead-up to the stock split was great for Apple shareholders. Share values rose 29.8% from the July 30 announcement to the Aug. 28 stock split. That was more than three times the increase in the S&P 500, which rose by 8.1%.

Although the early months were up and down, Apple ended up with a solid return for the year after its split but fell short of the S&P 500.

Since Apple's stock split happened several years ago, we have more data on the long-term changes. The chart below tracks Apple's return about one year before its stock split until October 2022. Overall, it has significantly outperformed the market during that time period.

GE's 2021 reverse stock split

General Electric (GE +0.25%) announced a 1-for-8 reverse stock split on June 18, 2021. At the time, shares were trading for $12.78.

There was minimal change in General Electric's share price after the announcement. From June 18 until the stock split on July 30, it ticked up by 1.3%. The S&P 500 increased by 5.5% over that time period.

For the three months after the stock split, General Electric's value continued to stay more or less the same. But over the first year as a whole, its share price sank.

That's not surprising when looking at GE's performance starting the year before its stock split. It has been somewhat volatile, going through periods of rapid growth and decline. Overall returns have been similar to the S&P 500, but it took a much more dramatic ride to get there.

Related stock split topics

Should I buy stock before it splits or after?

Even though stock splits sometimes get a lot of attention, don't base your investing decisions around them. If you believe a stock is a good long-term investment, then you should buy it, regardless of whether it's before, after, or nowhere near a stock split.

The advantage of buying a stock after it splits is that shares will be much more affordable. This used to be more important, but now that there are so many brokers with fractional share investing, it doesn't matter nearly as much. Fractional share investing allows you to buy expensive stocks, even if you can't afford a full share.

Strategizing about buying stocks before or after they split is, essentially, a form of timing the market. Market timing is a heavily studied subject, and the results are clear -- it's extremely difficult. You're better off learning how to research stocks and investing for the long term with quality companies. That will bring you much better results than trying to buy at the perfect time.

And it's worth saying one more time: stock splits do not change the value of your holdings.