Today the world's dominant chipmaker, Intel, announced that its board of directors has approved a 2-for-1 stock split along with an increase in the company's quarterly cash dividend first to be paid after the stock split.
Shares of Intel blasted 3.44 percent higher in morning trading to 137.31. The stock has traded as high as 143.69 and as low as 65.66 during the past 52 weeks.
"Fundamentally, a stock split does not affect the balance sheet or help earnings," said Peter Coolidge, a trader at Brean Murray. "It is more of a psychological factor--but it is a very relevant factor."
One psychological factor is an investor's perception that it is less risky to buy shares at a lower cost, and suddenly they are able to purchase stock that once seemed out of their range.
"But more importantly, it is a signal that the management and board of directors is optimistic about the company's future," said Coolidge. "It is a vote of confidence that they are optimistic about their future and bullish on the market."
Intel's stock split will be effected as a special stock distribution of one share of common stock for each share of the company's common stock outstanding.
Stockholders of record on March 23, 1999, will be entitled to one additional share of common stock for each share of the company's common stock held on that date.
The company expects that its outstanding common stock will begin to trade on a post-split basis on April 12, 1999.
Shares of Intel closed yesterday at 132.75, and have traded as high as 143.69 and as low as 65.66 during the past 52 weeks.
The increased quarterly cash dividend will be first paid after the stock split. On a post-split basis the dividend will be increased from 2 cents per share to 3 cents per share. That dividend is payable on June 1, 1999, to stockholders of record on May 7, 1999.