Apple Displaces AT&T in Dow Jones Industrial Average Index
Apple will replace AT&T in the Dow Jones Industrial Average (DJIA) after the close of trading on Wednesday, March 18.
The index change was prompted by Visa's 4:1 stock split which is
scheduled to be effective at the same time. The post-split adjusted lower price
of Visa will reduce the weighting of the Information Technology sector in the
index. Adding Apple to the index will help to partially offset this reduction.
In price weighted indices such as the DJIA, a large change in price of a high
priced stock can have a material impact on sector representation in the index
and this index change is designed to minimize that impact. The Telecommunication
Services sector will continue to be represented in the DJIA by Verizon
Communications.
"As the largest corporation in the world and a leader in technology,
Apple is the clear choice for the Dow Jones Industrial Average, the most
recognized stock market
measure," says David M. Blitzer, Managing Director
and Chairman of the Index Committee at S&P Dow Jones Indices.
measure," says David M. Blitzer, Managing Director
and Chairman of the Index Committee at S&P Dow Jones Indices.
"The DJIA is price weighted so extremely high stock prices tend to
distort the index while very low stock prices have little impact. The timing of
Apple's addition to the DJIA hinged on two stock splits: Apple's 7:1 last June
and Visa's 4:1 on March 19th this year. Apple's split brought the stock price
down closer to the median price in the DJIA. The Visa split will reduce the
technology weight in the DJIA and make room for Apple. Among the current DJIA
constituents, AT&T has one of the lowest prices. Moreover, the DJIA is
over-weighted in telecommunications and AT&T and Verizon are quite similar,
though AT&T has a smaller market capitalization."
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