The price-weighted Dow Industrials are more receptive to Amazon’s 20-to-1 split. As Walgreens reassesses its Boots division, the Dow index committee may consider removing the business from the index.
After Amazon and Alphabet, who split 20-1 in February, Nvidia may be lurking in the background.
With massive stock splits, mega-cap tech stocks are losing their mega share prices. Earlier this year, Alphabet announced a 20-for-1 stock split, making it the first company to announce a stock split of this magnitude. A 20-for-one stock split was announced by Amazon on Wednesday.
After adjusting for the recent split, Amazon’s stock would have closed the day at $139.28. With Amazon’s shares split, the e-commerce giant’s price-weighted Dow Industrials component is now more acceptable. After adjusting for the price splits, Amazon would have the 12th-smallest weighting among the 30 stock indexes, putting it exactly in line with Walmart’s weighting. The Consumer Discretionary category is distinct from Walmart’s Consumer Staples.
To be fair to Walgreens, the Dow index committee might consider removing the Boots unit from its index. Even though Walgreens is a Consumer Staples stock, Amazon’s replacement would still offer the consumer retail sector a strong showing. The price-weighted index’s second-least influential stock, Walgreens, is trading at $48.
In addition to Alphabet and Amazon, Nvidia may be lurking in the shadows. In July, the chipmaker announced a 4-for-1 stock split; the stock is presently trading at $230. Nvidia, if included in the Dow, would be the sixth-largest weighting, greatly outweighing the Dow’s least significant stock, Intel, which currently trades at around $48.
Cisco, the index’s fourth-least prominent company, and IBM, which has the eighth-smallest weighting and has already completed the spin-off of its Kyndryl-managed infrastructure unit, are two other IT companies that could remain vulnerable.
When Apple was added to the Dow in March 2015, just nine months after completing a 7-for-1 split, it was the final major tech company to join the index. (Another 4-for-1 split was completed in 2020.)
