If you're a long-time shareholder in Walmart (WMT) stock wondering why the world's largest retailer effected a three-for-one stock split near the end of February, well, the move wasn't for you. It was for Walmart's employees.
After all, investors don't need stock splits anymore – not in a world where they can buy fractional shares for free on their smartphones. But Walmart, like a lot of companies, has a program where its employees can buy shares through payroll deductions. The issue? WMT's price was getting a little too rich for the program to work as intended.
After rising almost 18% on a price basis over the past 52 weeks, Walmart stock is trading at record levels. Indeed, at about $174 a pop, WMT stock stands 20% above its three-year average price of $145. Regrettably, the stock's high-flying ways put it out of reach for some.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
"[Founder] Sam Walton believed it was important to keep our share price in a range where purchasing whole shares, rather than fractions, was accessible to all of our associates," said Walmart CEO Doug McMillon in a press release.
The solution? A three-for-one stock split ahead of the open on February 26. Recall that as much as the market likes stock splits, they're essentially immaterial. Nothing about a company's fundamentals or outlook changes. A stock split is like making change. I give you two $10s for a $20.
In Walmart's case, shareholders get three shares for every share held – and that could make a big difference to Walmart employees. That's because the company provides a 15% match on the first $1,800 invested each year by eligible associates.
Walmart's company match works out to $270 – or not even enough to buy two full shares pre-split. After the split, however, that $270 match will buy more than four full shares of this blue chip stock.
What it means for WMT investors
Not much. As noted above, stock splits get the market excited for maybe a minute, but they are meaningless. The arithmetic changes, but the fundamentals don't.
For example, Walmart’s outstanding common stock will grow to approximately 8.1 billion from 2.7 billion shares. At the same time, the dividend per share will drop by two-thirds. Walmart, a member of the S&P 500 Dividend Aristocrats, just hiked its payout for a 51st consecutive year. For fiscal 2025, shareholders will receive an annual cash dividend of 83 cents a share on a post-split basis. That's down from $2.49 on a pre-split basis, but shareholders will own three times as many shares.
If there's anything interesting about WMT's stock split, it's that it will greatly reduce the name's weight in the Dow. Unlike the S&P 500, which is weighted by market capitalization, the Dow is weighted by price. Pre-split, Walmart is the 17th most important Dow Jones stock with a 3% weight in the index. Post-split, WMT will drop to 26th place with a weight of 1%.
Interestingly, Amazon.com (AMZN) will join the Dow at the beginning of trading next week. It will slot into the place formerly held by Walmart and its roughly 3% weighting in blue chip index.
AMZN has been one of the best stocks of the past 30 years, and anyone who put $1,000 into Amazon stock a couple of decades ago has done even better. Sadly, Walmart has been a market laggard over the last 20 years.
If past is prologue, more AMZN and less WMT in the Dow will be good for this bluest of blue-chip market benchmarks.
Related Content
-
The Most Popular Apps for Retirement Planning in 2025A J.D. Power survey ranks retirement planning apps based on customer service and satisfaction. Does your financial app make the cut?
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary Forms
Standard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
This Is How Life Insurance Can Fund Your Dreams NowBeyond a death benefit, life insurance can provide significant financial value and flexibility through 'living benefits' while you are still alive, helping with expenses like education, business ventures or retirement.
-
Potential Trouble for Retirees: A Wealth Adviser's Guide to the OBBB's Impact on RetirementWhile some provisions might help, others could push you into a higher tax bracket and raise your costs. Be strategic about Roth conversions, charitable donations, estate tax plans and health care expenditures.
-
One Small Step for Your Money, One Giant Leap for RetirementSaving enough for retirement can sound as daunting as walking on the moon. But what would your future look like if you took one small step toward it this year?
-
This Is What You Really Need to Know About Medicare, From a Financial ExpertHealth care costs are a significant retirement expense, and Medicare offers essential but complex coverage that requires careful planning. Here's how to navigate Medicare's various parts, enrollment periods and income-based costs.
-
I'm a Financial Planner: Could Partial Retirement Be the Right Move for You?Many Americans close to retirement are questioning whether they should take the full leap into retirement or continue to work part-time.
-
From Mortgages to Taxes to Estates: How to Prepare for Falling Interest RatesAs speculation grows that the Federal Reserve will soon start lowering interest rates, now is a good time to review your financial plans for housing, estate, taxes, investing and retirement to make the most of potential changes.
-
This Is How Lottery Winners Build Lasting Legacies, From a Financial ProfessionalWinning a massive lottery jackpot, like the recent $1.4 billion Powerball, requires seeking immediate legal and financial counsel, protecting your identity and winnings and planning your legacy.
