What Is a Stock Split?
A stock split occurs when a company divides its existing shares into multiple new shares, proportionally reducing the share price. In a 5-for-1 split, each shareholder receives 5 shares for every 1 held, and the price per share drops to one-fifth. The total market value of the holding remains unchanged — only the share count and price change.
Companies split their stock to improve accessibility by reducing the per-share price, making it easier for smaller investors to buy whole shares. Popular recent examples include Apple (4-for-1 in 2020) and Tesla (3-for-1 in 2022). Reverse splits (consolidating shares) raise the share price, often to meet exchange listing requirements.
Frequently Asked Questions
No. A stock split proportionally adjusts both the share price and share count. Your total portfolio value remains exactly the same immediately after the split.
The per-share dividend is reduced proportionally to the split ratio, but since you hold more shares, your total dividend income remains unchanged.