Apple, the most valuable company on the planet, is finally getting the recognition it deserves from the people that run the world’s most well-known stock market index. Apple will join the Dow Jones Industrial Average later this month.
Apple(AAPL, Tech30) will replace AT&T(T, Tech30) in the Dow — an exclusive club of 30 stocks that also includes tech giants Microsoft(MSFT, Tech30), Intel(INTC, Tech30) and Cisco(CSCO, Tech30) as well as brand-name consumer firms Walmart(WMT), Coca-Cola(KO) and Disney(DIS).
“As the largest corporation in the world and a leader in technology. Apple is the clear choice for the Dow Jones Industrial Average,” said David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, in a statement.
Apple will enter the Dow at the close of trading on March 18.
Apple stock’s incredible rise: The company, maker of the enormously popular iPhone, is set to hold an event next Monday in which it is widely expected to give more details about its new Apple Watch.
Shares of Apple rose as much as 2% following the Dow news, but ended the day flat as the broader market tanked due to fears that the Federal Reserve will raise rates sooner rather than later thanks to a strong jobs report.
Apple has made a lot of professional and mom-and-pop investors a lot richer in the past few years. The stock has soared nearly 1,000% since the current bull market began six years ago, and it is up more than 2,700% since the Nasdaq tech bubble burst in 2000.
But the move into the Dow may not change much for Apple. It is in many ways just symbolic.
Apple is already the biggest company in the S&P 500, the market index that most mutual funds use as a benchmark to judge their performance.
There are also a lot more popular investments, such as the SPDR S&P 500(SPY) exchange-traded fund, tied to the S&P 500 than there are for the Dow. Some market experts even think the Dow is no longer relevant since it only has 30 companies, many of which are old industrials from the 20th century.
Still, the Dow continues to get a lot of attention because its value, currently around 18,000, is so high. It is the most well-known market barometer of stock market performance for most investors.
What took the Dow so long? You might be wondering why Apple is only now being added to the index. It took this long for the people who run the Dow to recognize that it’s a more important company than AT&T? (Heck, where would AT&T be these days if not for Apple and the iPhone?)
The main reason is that up until recently, Apple’s stock price was too high to be considered for the Dow. The Dow is actually a price-weighted average of 30 stocks. So if you have one stock with an extremely high stock price, it could skew the Dow’s performance.
This is no longer an issue following Apple’s big stock split last summer. The company increased the number of shares it had by a factor of seven.
That reduced the share price from about $645 a share to $91, but it did not change the overall value of the company. If you owned 100 shares of Apple before the split, you simply wound up with 700 at the lower price.
Still, even at Apple’s current price of just shy of $130, there are five Dow companies with heftier stock prices: 3M(MMM). Boeing(BA), IBM(IBM, Tech30), Goldman Sachs(GS) and Visa(V). Visa actually has the highest price at $274 a share, but Visa’s price is also about to shrink since it too will soon split it stock.
Why is the Dow hanging up on AT&T? Ma Bell has been in the Dow since 2005. It actually was removed briefly in 2004. But former Baby Bell SBC, which was already in the Dow in 2005, bought Ma Bell and renamed itself AT&T.