Coca-Cola (NYSE:KO) is proposing its first stock split since 1996. If it is executed the share price will be cut in half and the amount of the soft drink maker’s outstanding stock will double. This strategy could bear watching for blue chip investors. Historically Companies have a nice run after a stock split, so Coke could be an intriguing option once the split takes place.
The measure is expected to go to vote in July and if approved will be effective in August. The Company’s total number of shares will increase to 11.2 billion from the current level of 5.6 billion shares. Coke, which has been trading since 1919 has only executed 10 stock splits in its history. Following the last 2 for 1 split in 1996 the Company’s stock increased 13.5% within 10 trading days of the execution date.
The announcement comes a little over a week after the Company posted better-than-expected first quarter profit on strong growth in emerging markets. In addition, it has recently become the largest soda company in North America after taking the top spot away from Pepsi. The stock is trading at a 14 year high, near its all time record of $87.18 that was set in 1998. Some analysts feel that the move reflects the board’s confidence in the Company’s long-term growth and financial performance.
It will be interesting to see what noted investor Warren Buffet feels about the split as he is famously against the strategy. Mr. Buffet has gone on record many times in the past stating that stock splits are nothing more than short term strategies that only benefit Wall Street. KO is the largest holding of Berkshire Hathaway.