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Apple (AAPL) a Shoe-In for the Dow Amid Stock Split

April 24, 2014 10:26 AM EDT

Amid news that Apple, Inc. (NASDAQ: AAPL) will splits its stock 7-for-1 speculation has ensued that the company will finally be tapped to join the Dow Jones Industrial Average.

Because the Dow is a price-weighed average, having a nearly $600 stock in the Dow was not feasible. With the stock split effectively moving the price below $100 per share, an addition to the Dow is now easily possible. Also, given that Apple is the largest company in the U.S. by market cap it makes sense that it should be in the Dow. S&P Indices, which owns the Dow brand, however, is not talking.

S&P Dow Jones Indices Director & Global Head of Communications, David Guarino told StreetInsider.com in an e-mail, "We cannot comment on the potential for any company to be added to or removed from our indices. We consider this material, market moving information."

To be added to the Dow, Apple would have to replace a current component and the industry weighting would have to make sense. Technology currently makes up 11% of the Dow, while telecommunications makes up 3.2% - Apple could easily be considered both. Given the low tech/telecom exposure, the Dow committee could easily make a decision to take out any laggard and replace it with Apple. On top of the list to be replaced by Apple should be: United Technologies Corp. (UTX), DuPont (NYSE: DD), and Goldman Sachs (NYSE: GS).

So while S&P Indices is not talking, there is an easy case to make that Apple should now be added to the Dow once the split is complete. On the split timing, Apple shareholders of record at the close of business on June 2, 2014 will receive six additional shares for every share held on the record date, and trading will begin on a split-adjusted basis on June 9, 2014.



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