According to Bank of America, several companies are prime candidates for a stock split in the near future, which could lead to shares doubling the average market return, if historical trends are any indication. Jared Woodard of Bank of America Securities noted that, in recent months, companies have been splitting their stock at a rate not seen in over a decade. He also pointed out that more stock splits could be on the horizon, as S&P 500 Index ($SPX) stocks with high share prices above $500 make up 14% of the benchmark index.
If you’re not familiar with stock splits, it’s important to know that they do not fundamentally change anything about a company. A stock split reduces the share price while increasing the total number of outstanding shares, without impacting shareholder equity. However, Woodard’s research indicates that stock splits often signal future outperformance. He referenced BofA research suggesting that shares could see returns of 20% to 25% over the next 12 months. Woodard noted that this exceeds the broader market’s average return of 12% over the same period.
