While there continues to be a widening of the income gap between the rich and the poor in the world, companies like MasterCard Incorporated (NYSE/MA) continue to make a lot of money from every transaction made using their credit cards. Recently, MasterCard announced it would be splitting its shares on a 10-for-one basis while also increasing its quarterly dividend by 83%. MasterCard is also looking to buy back up to $3.5 billion of its Class A common stock.
The move by MasterCard makes sense and helps to boost the market value of the company for its current shareholders and future investors. The stock split will allow for trading liquidity and for smaller-scale investors and traders to participate in the stock, given that the company’s shares reached a record high at over $800.00 on Wednesday.
Chart courtesy of www.StockCharts.com
In addition, the increase in dividends will attract income investors and the buyback will help to add some support and give the stock market some confidence in the stock as an investment opportunity.
What MasterCard has done is what other high-priced companies with high cash levels should also be doing.
Stock splits make sense for high-priced stocks as a way to increase liquidity to more investors and inevitably help to drive up the share price and create an investment opportunity.
The following are three higher-priced stocks that I feel could eventually see a stock split and offer an investment opportunity:
Apple Inc. (NASDAQ/AAPL) is under pressure from investor Carl Icahn to increase its share buyback program in a strategy to distribute some of its massive $147 billion of cash to shareholders. The move would inevitably increase the value of Apple’s shares, making it an attractive investment opportunity. There are also suggestions Apple should issue a special dividend as another way of distributing its cash. In addition, with the stock priced at nearly $600.00, we could eventually see a stock split surfacing that could create an investment opportunity.
Google Inc. (NASDAQ/GOOG) is another high-priced stock that could be the subject of a stock split that could drive an investment opportunity. Sitting at nearly $1,100 a share, the Internet services provider has about $46.0 billion in free cash that could be used to initiate a dividend payout or share buyback.
Finally, another high-priced stock that could learn from MasterCard’s example is priceline.com Incorporated (NASDAQ/PCLN). The company doesn’t have the massive cash balance that Apple and Google have, but at its current price of nearly $1,200 a share, a stock split would make sense for both current and potential investors, meaning it could create an attractive investment opportunity.