Buying just one share of the typical S&P 500 stock will now cost you a steep $217. And don't count on stock splits to make the price more palatable either.
Ten S&P 500 stocks, including NVR, Booking Holdings and AutoZone, now trade for 1,000 or more, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSurge. And that's not including the B shares of Warren Buffett's Berkshire Hathaway (the lower priced A shares were used in the analysis). And at the rate its growing, shares of Nvidia at nearly 800 are close to breaking the 1,000 barrier, too.
All told, the average S&P 500's stock price of 217 is nearly twice the 111 average just five years ago. Typically when stock prices rise, companies eventually split their shares. That's not happening this time. And that's potentially important as stock splits matter with investors. ChipotleCMG appealed to investors Wednesday by announcing a split. It trades for roughly $2,900 a share.
"Stock splits and reverse splits often result in short-term abnormal returns even though such split events do not change any fundamental factors affecting the valuation of a firm's stock," says a 2023 paper co-authored by John Duffy, professor at University of California at Irvine.
Where Are The S&P 500 Splits?
S&P 500 stock prices are reaching nosebleed levels to due to several factors. A rising market and a dearth of splits are big reasons.
Just this year, the average S&P 500 stock rose 2.7%. And that's following a more than 20% jump in the S&P 500 in 2023. Meanwhile, stock splits have become a bit of an endangered species in the S&P 500. Only two S&P 500 companies, Walmart and Cooper, split their shares this year in addition to Chipotle's announcement. Retailer Walmart announced in January plans to split it shares three-to-one.
To compare, last year just four S&P 500 companies split their shares, the lowest level since the same number in 2019. Back in 2022 and 2021 10 S&P 500 companies split their shares in each year.
"In the wake of COVID we did see a bit of a spike in splits, I'm assuming as there were more retail investors getting involved and companies wanted to attract those folks," said Christine Short, vice president of research at Wall Street Horizon.
But a split can have a psychological effect.
S&P 500 Splits Dwindle
| Time | No. of splits |
|---|---|
| YTD | 2 |
| 2023 | 4 |
| 2022 | 10 |
| 2021 | 10 |
| 2020 | 7 |
| 2019 | 4 |
| 2018 | 7 |
| 2017 | 6 |
| 2016 | 9 |
| 2015 | 15 |
| 2014 | 10 |
| 2013 | 15 |
| 2012 | 16 |
| 2011 | 19 |
Sources: S&P Global Market Intelligence, IBD
Walmart Defends Splits
To be sure, a stock split in itself is a wash. While a company will half its share price in a 2-to-1 split, it also doubles its shares outstanding. The net effect doesn't change investors' ownership.
But some companies still defend splits. Walmart's three-to-one split would reduce the company's per-share stock price to around 58 a share. It's interesting to note that Walmart shares, currently trading for 175, don't even exceed the S&P 500's average.
Walmart did the split to make the shares more approachable by retail investors, including its own employees, it says. "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 Doug McMillon, president and CEO of Walmart. "Given our growth and our plans for the future, we felt it was a good time to split the stock and encourage our associates to participate in the years to come. As Sam said, 'We're all in this together. That's the secret.'"
Cooper completed its four-for-one stock split in February.
Where Are Splits?
Why are splits down at a whole, though? Many companies that shrug off splits point out that they don't have any real economic impact. Additionally, most online brokerages since around 2017 allow investors to buy partial shares, making the per-share price less important. "Now investors can purchase portions of shares that were otherwise out of reach, so companies don't necessarily have to lower the barrier to entry to attract new and different types of investors," Short said. "Splits are typically used to create value for existing shareholders as they usually renew investor interest and attract new (often retail) investors who otherwise were priced out of expensive shares," Short said.
But splits still matter to some investors.
"Dozens of quality stocks, both on Nasdaq and the NYSE, are trading at nosebleed levels that are pricing Main Street investors like me out of the market. Unless one does options, it's become impossible to open even a 100-share position in a household name like Chipotle or Netflix, or in a lesser-known such as Mettler-Toledo, when a share can cost anywhere from $500 to $2,000," said investor Dorothy Lipovenko prior to Chipotle's split.
Just at least one company listened.
Highest Priced S&P 500 Stocks
| Company | Ticker | Price |
|---|---|---|
| NVR | 7,958.45 | |
| Booking Holdings | 3,578.49 | |
| AutoZone | 3,187.38 | |
| Chipotle Mexican Grill | 2,895.00 | |
| Broadcom | 1,276.00 | |
| Fair Isaac | 1,245.40 | |
| Mettler-Toledo International | 1,302.86 | |
| TransDigm Group | 1,214.98 | |
| O'Reilly Automotive | 1,145.29 |
