A stock split has no fundamental impact on a business's health but it is a sign of business health investors should heed. Data from Bank of America shows that companies that split their stock tend to outperform the broad market and deliver leveraged returns over time. 

Companies split stocks because their share prices are rising and are expected to continue rising to levels that make ownership difficult for large market portions, including their employees. Their stock prices rise because the businesses are fundamentally healthy, either growing robustly or driving cash flow to sustain capital return. They are expected to continue rising because of unmet demand; investors want more. 

Regarding ownership, it is the employees that stock splits are intended to help most. Companies like Broadcom (NASDAQ: AVGO), Casey’s General Stores (NASDAQ: CASY), and Costco (NASDAQ: COST) utilize several options that allow their employees to buy stock such as ESPPs, RSUs, and stock options. However, with shares trading at nearly $250, $400, and nearly $1000, respectively, it is difficult for employees to buy shares and not disrupt family budgets or be problematic for the business. In that scenario, the company can make buying shares easier for its employees and the entire market without hurting budgets, investment goals, or portfolio allocation by initiating a stock split. 

Broadcom: Split in 2024 and May Split Again Soon

Broadcom may have another stock split on the horizon. Up more than 400% in the last two years and 30% since the last earnings report, this stock is heading higher still. Trading at $230 is not out of reach for most investors; however, AI-driven growth, robust cash flow, and capital returns will sustain the market uptrend and could soon lead the stock back above $500.

Analyst response to the FQ4 2024 report was overwhelmingly bullish and pointed to new highs for this market, likely set in early 2025. The uptrend in the analyst sentiment is likely to continue in 2025 because of the momentum shown in the report and the potential for caution in the guidance and forecasts. The company’s lean into infrastructure software is paying off well, with growth in that segment up double-digits organically at the end of F2024 and the acquisition of VMWare boosting it into the triple-digit range. Both the legacy business and VMWare are expected to gain traction in 2025. The guidance is for revenue growth near 15% in 2025 and acceleration in 2026 and 2027, centered on custom AI accelerators for leading hyperscalers and AI infrastructure. 

Casey’s General Stores: Self-Funded Growth Sustains Stock Price Uptrend

Casey’s General Stores' claim to fame is the ability to pay dividends and buy back shares while self-funding the expansion of its convenience store empire. It is the third-largest U.S. convenience store chain, recently wrapping up the acquisition of Texas-based Fikes into its portfolio. The company will use the acquisition as a foundation for expanding and deepening penetration in the Southwest, continuing the trends that have driven its share price higher for the last two decades. Trading at nearly $400 per share, the stock has reached a level where a split is likely, and the price action is expected to continue trending higher in 2025. 

Costco: Stocks Splits and Special Dividends Are in its Future

Costco stock trades at nearly $1000 and is the most likely to split because of a high share price. Sustained growth, a industry-leading position, and robust cash flow support its share price uptrend, which is expected to continue in 2025. The cash flow is critical because it allows for business reinvestment, a healthy balance sheet, cash build-up, and capital returns. The cash build is crucial because Costco will pay a special distribution when it reaches a high enough level, which investors are banking on. The trends suggest that the level will be reached by late 2025 or early 2026 and could be worth $15 per share. The trends also indicate that Costco can pay special dividends every two to four years.