A stock split occurs when a company increases the number of outstanding shares by issuing more shares to its current shareholders. This generally makes the stock more affordable for investors. SCHD, one of the best dividend ETFs, announced a 3-for-1 stock split, which means that for every share owned, shareholders will receive three new shares. As of September 27, 2024, SCHD closed at $84.26.
Why SCHD is Doing a 3-for-1 Stock Split
The main reason for the split is to make SCHD more accessible by reducing the per-share price, which encourages more retail investor participation. For example, after a 3-for-1 split, the share price drops to about one-third of its original price, which can make it more appealing to a wider group of investors. This can also boost trading volume and liquidity, which benefits investors by making trades smoother and less expensive.
Long-Term Goal of the Stock Split
The long-term goals of the stock split are likely:
- Increased Accessibility: By lowering the per-share price, SCHD aims to attract a broader base of investors, including those who prefer buying whole shares rather than fractional ones.
- Improved Liquidity: A higher number of shares at a lower price typically results in increased trading volume, enhancing liquidity and making it easier for investors to buy and sell shares.
Impact on Dividend Yield
The dividend yield is calculated as the annual dividend per share divided by the share price. In a stock split, both the number of shares and the dividend per share are adjusted proportionally, meaning the dividend yield remains unchanged. For example, before the split, SCHD may have paid $3 per share annually, but post-split, it would pay $1 per share since investors now own three times as many shares.
With SCHD’s current price of $84.26 and its dividend distribution, the yield remains a key focus for income-seeking investors, offering a reliable dividend payout backed by a portfolio of high-dividend-yielding stocks. The split does not directly increase or decrease this yield but makes investing in SCHD more approachable for a broader audience, which can contribute to its popularity and continued dividend distribution.
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