Microsoft Stock Split History | The Motley Fool

Many successful companies have done stock splits many times throughout their history, and few have been as successful as Microsoft (MSFT -2.41% ). The Redmond-based tech giant has turned franchises such as its Windows operating system and Office productivity software suite into cash cows, and the resulting share price growth has prompted Microsoft to make several spin-offs to keep its share price from climbing into the stratosphere. Below, we’ll take a closer look at Microsoft’s stock split history and what it has meant for investors.

Microsoft’s stock split history

Here are Microsoft’s stock split dates and ratios during its history as a publicly traded company:

Data source: Microsoft Investor Relations.

When you combine all of the spinoffs that Microsoft has done since its IPO, you can see that despite its relatively modest stock price, investors who were smart enough to get in on the ground floor have done quite well. For every stock held by a stockholder before Microsoft’s first spinoff, you own 288 shares, assuming you never made a sale along the way.

Image source: Microsoft.

Where have all the splits gone?

The most obvious thing to come out of this history of Microsoft stock splits is that the company hasn’t had a chance to split its stock in a long time. After completing seven spinoffs in less than a decade from 1990 to 1999, Microsoft crashed during the bear market from 2000 to 2002.

Moreover, the tech giant’s decision to split its shares in 2003 seems very different from the motivation for past splits. In all cases prior to the 2003 split, Microsoft shares were trading above or near the $100 per share level. Yet the company completed the 2003 split at a price of just $48 per share.

That said, 2003 was a momentous occasion for Microsoft shareholders for another reason: it was the first time the company declared a regular dividend. As the company described at the time, “Declaring a dividend demonstrates the board’s confidence in the long-term growth opportunities and financial strength of the company.” At the same time, Microsoft believed the split combined with the payment of a dividend “would make Microsoft stock even more attractive to a wider range of investors.”

Image source: Microsoft.

Did the splits succeed?

Microsoft provides some interesting data with its split history, noting the immediate short-term impact of the split on its stock price. On only one occasion—in September 1987—Microsoft’s stock had a closing price immediately after the split that was lower than the proportionate closing price on the day before the split. Specifically, Microsoft shares closed at $114.50, which would have implied a price of $57.25 after the 2-for-1 split. However, the actual closing price was only $53.50 per share. .

Meanwhile, the remaining eight divisions showed gains. The biggest came in 1996, when the pre-split figure would have implied a stock value of $76.39, but the stock closed the next day at $81.75. That’s a 7% gain, and it shows that even though stock splits have no theoretical impact on a company’s value, shareholders nonetheless place a lot of weight on splits in their considerations.

Is another split coming?

It doesn’t seem likely that Microsoft will split its stock for the foreseeable future. Even with its recent gains, it’s only in the past year that the stock has broken above $50 per share. To justify a spin-off now, the company would have to follow its 2003 strategy of doing a spin-off well below the typical $100 per share level. Microsoft also doesn’t have the added impetus to declare dividends as a reason for the move.

Microsoft also has the added pressure to maintain its influence in the Dow Jones Industrials (^ DJI -2.82% ). The Dow Jones is a price-weighted benchmark, and several of its rivals have stock prices that are nearly double or more where Microsoft currently trades. A split would only further weaken Microsoft’s weighting in the Dow, and it would be unattractive for a company seeking to regain its role as a technology industry leader.

Microsoft’s stock split history shows how successful shareholders have been over the long term. Even though Microsoft will never split its stock again, long-term investors have already seen the power of the splits it has done before.