Walmart recently completed its first stock split in decades; Chipotle is planning the first stock split in its 30-year history to be completed in June.
In a rapidly rising stock market, splitting shares is not a surprise. Before its split, Walmart shares were near an all-time high around $170. Chipotle, even further out on the market chart, has shares nearing $3,000 — its stock split is to be effective June 26. Though a stock split can make shares more affordable, there are other factors at play, including how heavily a company promotes its ESPP, availability and employee usage of employer-sponsored financial education, and competing financial interests among lower-level employees, many of whom may be struggling to make ends meet.
What's more, owning fractional shares has downsides. For example, whole shares are generally easy to transfer if you switch brokerages, whereas fractional shares may have to be sold in order to transfer the cash value.Splitting a stock and having a generous ESPP can only go so far when it comes to encouraging employees to buy the company stock.
But most companies aren't Google, the market has long since passed the Silicon Valley of two decades ago, and employee stock programs today are still not widely embraced at most companies. Typically, about 20% to 30% of an organization participates. Reasons for low participation can include lack of education about the plan and competing financial interests that employees are managing.
For employees who have some discretionary income, investing in their company's stock could be a good tool as part of an overall investment strategy. But even so, Kownatzki said many people would be better off buying a small fraction of shares in a low-cost index fund and accumulating that over time. "I would rather have diversification in an index fund," he said.
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