The exterior and parking lot of a Williams-Sonoma retail location. Brycia James As a dividend growth investor, it's a beautiful sight to behold when my holdings announce stock splits. Astute readers may be asking why I would hold this opinion.
A stock split makes no difference to the fundamentals of the underlying business, right? Yes, that's true. A stock split simply means there are more pieces (shares) of the same profit pie. However, we have to consider the dynamics behind why a company would be announcing a stock split in the first place.
There are probably exceptions to the rule. But stock splits tend to mean that an underlying business has executed at a high level for years or decades. In turn, these strong fundamentals push the share price ever higher over time.
In the days before fractional shares, share prices sometimes in the thousands of dollars, kept retail investors out of stocks. This isn't as much of an issue anymore. So, I would wager that the reason for stock splits today mostly comes down to investor psychology.
I hope that I'm not the only one, but I dislike buying fractional shares of a stock. I know that owning 0.5 shares of a stock makes little difference versus owning a whole share.
Yet, there's something about fractional shares that just seem less neat to me overall and in my spreadsheets. Williams-Sonoma ( NYSE: WSM ) is a major holding in my portfolio. Comprising 2.
2% of my portfolio, the omnichannel specialty home products retailer is my fifth-bigg.
