Lately, the conversation here has been about fractional shares and stock splits that cause them. There are plenty of reasons why a stock or ETF may split. VTI is one ETF that has split in the past. Will it split again though?
Since VTI has been performing well, it seems unlikely that VTI will split any time soon.
There are a few things to be aware of, however, if VTI were to split again. This could cause you to hold fractional shares of the ETF, leaving you to wonder how you should handle those shares. We will discuss a little about a split when it comes to VTI, and what you should do if it does split.
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Why will VTI likely not split?
It is difficult to gauge whether or not an ETF will split, especially if they are not priced too low or too high. For this reason, there is no definite answer to whether VTI will split or not. Most indicators, however, point to the fact that it will not split any time soon.
VTI has been performing well, with a current price per share at just over $200. This is a price that is still affordable to many investors, so a split does not seem necessary. The ETF will also very unlikely to do a reverse split since it is not priced low.
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When did VTI split?
The only time VTI has ever split was back in June of 2008. The date was 18 June 2008 to be exact. This was a 2-for-1 split, so shareholders ended up with 2 shares for every share they owned before the ETF split. We will talk more about the different types of splits in just a minute.
Why do ETFs split?
ETFs split for one of two reasons. They split to either make the ETF more attractive to investors by lowering the price per share or to raise the price per share while decreasing the number of shares available. An ETF may reverse split in order to bring the price per share up in an effort to not only make it more attractive to investors but to keep the price from going too low and causing the fund to become delisted.
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What are the different types of splits for an ETF?
With any kind of split, it is important to remember that your portfolio value does not change. The split is more or less cosmetic in nature as your portfolio as a whole stays the same. You will simply own either more or less shares at a different price.
Regular split
With a regular split, stocks or ETFs see their share prices decrease by half (2-to-1 split) while the number of shares increases. For example, if you own 5 shares of a stock or ETF that splits at $20 per share, you will then own 10 shares priced at $10 a share in a 2-to-1 split. In a 3-to-1 split, you would own three times as many shares at 1/3 of the price per share. But, you probably already knew that if you’ve gotten this far.
Reverse split
. In a reverse split the share price increases while the number of shares decreases. So, if you own 10 shares of a stock at $20 a share and the stock does a reverse split, then you would own 5 shares of a stock at $40 a share.
Uneven reverse split
An uneven reverse split can be a little trickier. An uneven reverse split occurs when splitting shares causes fractional shares to occur. For example, if you own 10 shares of a stock at $20 a share and a stock or ETF does a 1-to-3 split, you would end up with 3.33 shares at $60 a share.
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Why would VTI split?
The only reason VTI would split is so the company can make its shares more affordable to investors. Lowering the price per share would allow for more people to be able to afford the ETF. However, since VTI is performing well and the price per share is still not extremely high, it is not very likely that VTI will split any time soon. The market has done stranger things in the past, though.
What should I do if VTI splits?
For the most part, you will not need to do anything since your portfolio value will remain the same. In the case that VTI splits and you are left with fractional shares, however, you may be able to reinvest your dividends to buy fractional shares.
Reinvesting dividends of a split stock
With platforms like Vanguard, you can reinvest your cash dividends in the same stock or ETF even if reinvesting causes you to have fractional shares as a result. This is done via the Dividend ReInvestment Plan (DRIP) that several brokerage platforms offer.
What other Vanguard ETFs have split?
At the same time that VTI split in June 2008, VWO and VXF also split. All three of the Vanguard ETFs that split at this time did so as a 2-for-1 split. VOO also did a reverse split on October 24, 2013, causing the price to go from$79.97 to $160.46.
The bottom line
VTI does not seem likely to split any time soon. The only reason a split would occur is to make the share price more attractive to investors interested in the fund.
It is difficult to guess whether or not any stock or ETF will split though unless the price per share is extremely low and a reverse split would prevent delisting. If VTI were to split, however, your portfolio would remain the same so there is not much to worry about. You would also be able to purchase fractional shares with your dividends, even if your dividends only allow for the purchase of fractional shares.
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