In January 2015, Visa (V) declared a four-for-one split of its Class A common stock. Each Class A common stockholder of record at the close of business on February 13, 2015, received a dividend of three additional shares on March 18, 2015, for every share held as of the record date. On March 19, 2015, trading of Visa shares began on a split-adjusted basis.
Why Visa opted for a stock split
Visa’s stock price has risen steadily over the years. The stock rose 2.5 times from nearly $100 in January 2012 to over $260 by the end of 2014. It became the most expensive stock on the Dow Jones Industrial Average Index and one of the most expensive on the S&P 500 Index.
Stock splits are most common for companies whose share price increases to a very high level. Companies also take that route if the share price is much higher than the price levels of similar companies in the sector. The fundamental motive of a stock split is to make shares look more affordable to retail investors. The value of the company and its market capitalization does not change in a split.
A stock split might result in an increase in stock price, following the decrease immediately after the split. This is because a stock split generally gives a signal that the company’s share price has been increasing, and might continue to do so. This increases the demand for the stock and its price.
In April 2015, Visa declared a quarterly cash dividend of $0.12 per share of Class A common stock. The company declared and paid $591 million in dividends during the six months ended March 31, 2015.
The company’s dividend payout is comparable to other companies in the sector, as shown in the above chart.