CNBC is reporting that Apple will become part of the Dow Jones Industrial Average (DJIA) beginning at the opening of trading on March 19, 2015. The company will be replacing AT&T in the group of companies that make up the DJIA.
The Dow Jones Industrial Average is the bellwether of how the American economy is doing, at least in terms of corporate share value. The index is determined by looking at how the share price of 30 companies — referred to as the “Dow 30” — did during a particular trading session.
While Apple, which is the most valuable public traded company in the world, seems like it would have been a natural to join this group, it wasn’t until the company split its stock 7-to-1 last year that it was first considered. The company would have had way too much weigh in the average, with even slight price swings producing a correspondingly large jump in the Dow. Because of the stock split and an impending 4-to-1 stock split by Visa, the timing was right for Apple to join the club.
AT&T is reportedly being dropped as it has one of the lowest share prices in the current DJIA. Visa’s stock split reduced its weighting in the DJIA from 9.71 percent to 2.53, while Apple will account for about 4.66 percent of the average.
Our take on the news: Apple’s addition to the Dow 30 underscores the significance of the company to the American economy.