2-for-1 Stock Split Can Benefit Company and Its InvestorsAmerica Online's recent 2-for-1 stock split -- the Internet service provider's fourth since 1994 -- demonstrates the tremendous wealth an investor can gain from such action.
A stockholder who bought 1,000 shares of AOL, Dulles, VA, for $11,500 at the company's initial public offering in 1992 and held on to them would today own 16,000 shares valued at more than $1.08 million.
Similar 2-for-1 stock splits of Dell Computer and Harte-Hanks Communications and the 2-for-1 split planned by Williams-Sonoma for May 18 make now a good time to invest in these growing companies.
In a stock split, the number of shares is doubled and the price per share is halved, making the company more attractive to individual investors. A share of AOL, for instance, which traded at nearly $119 on Feb. 25 can be purchased in the less daunting $65 to $70 range after its March 16 split.
"Ideally, this split makes us more accessible to smaller investors, enabling all of our stockholders to share in the growth of America Online and become active participants in the rapid development of the interactive medium,'' chairman and CEO Steve Case said in a prepared statement.
Dell, the Round Rock, TX, direct seller of computers that recently reported record revenues for the 16th straight quarter, has split its stock five times in the last six years. After one split, the stock regained its original market value in just eight months.
"We are pleased to report that Dell stock appreciated more than 200 percent for the second consecutive year and that we again led the computer industry in return on invested capital,'' chairman and CEO Michael Dell said in a prepared statement.
Marketability of the stock was one of the factors behind the decision of Harte-Hanks, San Antonio, to conduct its split March 17.
"A split gives more liquidity to the stock, which was getting up to $40 to $45 per share," said CFO Jacques Kerrest of the company with 1997 sales of $638 million. "You can see from our numbers last year, we had pretty strong growth in the direct marketing part of the business, and we feel comfortable with analyst expectations [of continued growth]. Direct marketing is currently two thirds of our business, and we anticipate direct marketing to be larger in the next couple of years.''
In other financial news, software maker Open Market Inc., Burlington, MA, is experiencing an upsurge in share price since it received three patents for its electronic commerce technology in early March. Open Market plans to license the instant credit-card verification and electronic shopping cart technology.
Portfolio Value: If $1,000 had been invested in each of the 96 companies at the beginning of the year, the value would be $108,449, an increase of 9.2 percent.