Four Stocks Poised for Splits

07/29/2016 9:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

Stock splits, once a popular sign of company health and optimism, have become rare, observes Richard Moroney, editor Dow Theory Forecasts.

Since 2008, the S&P 500 Index has averaged nine companies splitting their shares every year.

In the previous 14 years, index components averaged 62 splits — with 100 or more splits in three of those years.

The recession-driven decline from 2008 through 2010 made sense, but splits have yet to recover to their former frequency.

While the S&P 500 returned nearly 75% from the start of 2012 to the end of 2014, the index’s stocks delivered only 35 splits, well below the historical average for a single year.

In this environment, predicting future splits is risky. While we stop short of promising a split in the year ahead, we’ve created a short list of stock-split candidates from our buy lists.

  • Lam Research (LRCX) - a semiconductor maker — currently trades at $89, and last split over 16.3 years at a price $134.
  • Laboratory Corp. of America (LH) — a healthcare diagnostics firm — currently trades at $136, and last split 14.2 years ago at a price of $104.
  • F5 Networks (FFIV) — a cloud and data networking firm — currently trades at $116, and last split nearly 8.9 years ago at a price of $71.
  • LKQ (LKQ) — an auto parts distributor — currently trades at $33, and last split 3.8 years ago at a price of $38.

These stocks stand out because of:

  • A history of splits, suggesting the company is amenable to the idea.
  • At least 65% returns since the last split, and at least 15% returns over the last six months, since companies aren’t likely to split while their stock is going down.
  • Solid operating momentum (at least 5% growth in sales and per-share profits over the last year).
  • Expected annual profit growth of 10% or more over the next five years.

Will all four stocks of these stocks split? Probably not. But they’re likely thinking about it.

Subscribe to Dow Theory Forecasts here…

By Richard Moroney, Editor of Dow Theory Forecasts

  By clicking submit, you agree to our privacy policy & terms of service.

Related Articles on STOCKS

Keyword Image
Debt Burden Exposed
01/18/2019 1:14 pm EST

Fed Chair Jerome Powell, former Fed Chair Janet Yellen and former Chair of the FDIC Sheila Bair, hav...

Keyword Image
Solid Base
01/18/2019 11:36 am EST

Crude oil is getting a boost on trade deal hopes as well as a week of optimism that global central b...