Here's why Apple joining the Dow is a 'historic moment' for the company
And this news for Apple was a long time coming.
On March 19, the world's largest company will join the world's most famous stock index, replacing AT&T.
Back in June 2014, Apple effected a 7:1 stock split, meaning that every one share of Apple became worth 7 shares, which took the stock price from around $700 to around $100. As of Friday, Apple shares were trading at around $128, just below their split-adjusted all-time high of $132.
When Apple announced its stock split back in April 2014, reports indicated that the company's soon-to-be-reduced share price could open the door for the company joining the Dow.
And now here we are.
The reason this high price tag kept Apple out of the Dow is because the index is price-weighted, not market-cap weighted, meaning that more expensive stocks, on a per-share basis, get a larger weighting and have a larger impact on changes in the index's price.
So price was a big reason why S&P couldn't add Apple to the Dow.
But there are also real reasons why Apple would want to be in the Dow.
Stocks have more visibility when they're in the Dow. The Dow, for all of its flaws, is the stock index that most people think of when they think of the "stock market."
Joining the Dow also opens Apple up to a new class of investor. All Dow members pay dividends, which gives investors at least some sort of regular cash return aside from the share price, and many income-focused funds and strategies will focus on buying Dow members.
Additionally, there are a number of investing strategies - like Dogs of the Dow - that are centered on investing in the index. Apple will also now be added to ETFs that include the Dow, leading to a potentially wider ownership.
According to Dow Jones, "a stock typically is added only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors," and so on some level, Dow Jones is reaffirming Apple's corporate reputation with this addition.
Following Friday's announcement, Piper Jaffray analyst Gene Munster told Bloomberg Radio that Apple's inclusion is a "historic moment."
It also just makes sense: Apple's market cap is currently over $750 billion, making it about 2 times larger than the next-largest publicly traded company in the US, ExxonMobil. And with $178 billion in cash on its balance sheet, Apple cash hoard is larger than the market cap of AT&T ($175 billion), the company it is replacing in the Dow.
Apples addition will also be effective at the same time that Visa - another Dow member - will effect a 4:1 stock split, meaning Visa shares will fall from around $275 to around $69 per share as every 1 Visa share becomes 4 Visa shares with 1/4th the price.
But according to StreetInsider, some analysts are less than thrilled with the news, with Trip Chowdhry of Global Equities Research saying that the Dow is for losing companies, not innovative companies like Apple.
Apple's next big announcement is set for next Tuesday, March 9, when we expect to see Apple Watch for the first time.