I Will Be Loading Up
By Jim Bauer
@porwest (112876)
United States
January 31, 2024 2:46pm CST
Now, let me just say this right off the bat so that it is clear.
When a stock split occurs, it means NOTHING.
Okay, now that that's out of the way let me explain. Yeah, yeah, I know. I am being vague. Work with me here. I am trying to draw you in.
It was announced today that Walmart will be splitting their stock in a 3 for 1 split. That means if you own 100 shares you will then own 300 shares after the split.
Post split trading will begin on the 26th of February by the way with the split date being the 23rd.
The current price per share as I write this is $165.24. That means if the split were to occur today, you'd have 3 times as many shares but at $55.08 per share. So, you gain nothing. You just have more shares.
BUT there is also still good potential upside for the stock. And so it just means you can accumulate more shares faster at the lower price post split, and for a guy like me who sells covered call options contracts, I will be able to accumulate 100s more shares faster to sell more covered call contracts.
One covered call contract is selling the right to sell 100 shares of a particular stock at a specified price at a specified date.
It means if I can sell more covered call options contracts, ultimately I can make more money faster from the premiums collected from selling the contracts.
Done right, which is of course my aim, I never have to actually sell any shares, the contract expires worthless, and I just keep the money I was paid for the right to sell.
So, once the split is done, I will be loading up on Walmart shares. For THAT reason, the announcement of the stock split excites me even if it means pretty much nothing for the value of my shares in any event.
6 people like this
5 responses
@porwest (112876)
• United States
31 Jan 24
@NJChicaa I know. Some people prefer to be broke and just dream about where they can live and where they can travel...at their desk...at work...living paycheck to paycheck...forever...with nice pictures of places they will never see on their computer screens as wallpaper...until they die...I get it.
3 people like this
@kaylachan (84815)
• Daytona Beach, Florida
31 Jan 24
If you can profit from it, that's great.
3 people like this
@kaylachan (84815)
• Daytona Beach, Florida
1 Feb 24
@porwest Yeah it is, isn't it?
2 people like this
@porwest (112876)
• United States
1 Feb 24
Your dividends would remain exactly the same. Nothing changes. Just the amount of shares you have and the price per share. Currently, pre-split, the dividend is $2.28 per share annually paid out at 57 cents per quarter. AFTER the split the annual dividend will be 76 cents per share paid out at 19 cents per quarter.
Ultimately you will still receive exactly the same amount in dividends because you will have three times as many shares.
1000 shares of Walmart pays $2,280.00 in a year in dividends pre-split.
3000 shares of Walmart pays $2,280.00 in a year in dividends post-split.
The only difference will be that at $55 per share you can accumulate more shares faster than you can at $165 per share.
Your value and dividends all remain the same. You just now have more shares. I hope that was explained easily enough to understand.
In my example regarding the covered calls, my advantage is that if I had 1000 shares pre-split I could only sell 10 contracts. Post split I could sell 30 of them. Granted—the options contracts premiums will also be split, so the value of my premiums would also be the same.
But I can more easily add 100 shares at $55 than I can at $165 to boost the number of contracts I can sell to increase my premiums proportionally. In other words, for each additional contract I can sell I increase my premium yield by 33% post-split.
Probably TOO much information, actually. But that's the gist of it.
1 person likes this
@porwest (112876)
• United States
1 Feb 24
I am almost certain there is an equivalent in the UK, although I have no idea what it might be called. Options, in general, are what we call them here and there are calls and puts. Calls are generally bullish and puts are generally bearish. But it depends on how they are dealt with.
Options are too complicated to discuss in detail here. But that's what we call these. Options.
1 person likes this
@LindaOHio (222417)
• United States
1 Feb 24
If the stock does REALLY well, the split is in your favor. It doesn't mean nothing. Have a good day.
1 person likes this
@LindaOHio (222417)
• United States
1 Feb 24
@porwest $578,019.99????? What does Berkshire Hathaway do? Yes, what you wrote makes sense.
1 person likes this
@LindaOHio (222417)
• United States
2 Feb 24
@porwest Wow! No wonder Warren is worth so much.
1 person likes this
@porwest (112876)
• United States
1 Feb 24
@LindaOHio Berkshire Hathaway is a multi-business conglomerate owned by Warren Buffet. They own all sorts of stuff. Railroads, they are major shareholders of Coca-Cola, they own GEICO Insurance, See's Candies, Dairy Queen, Fruit of the Loom, Duracell, Helzberg Diamonds, Pampered Chef, and several others.
Needless to say, it's a massive company. You can buy the "B" class shares which are much more affordable at $383.31 per share. lol
For kicks and grins, before the 50 for 1 split of the "B" shares in 2010, shares were $3,500 each. Shares traded post split at $66, so it's gained 481.8% in the 13 years since it split.
1 person likes this
