Apple Split Forces Changes in Dow Jones Industrial Average

Salesforce, Amgen and Honeywell are being added to oldest Wall Street index while Exxon, Pfizer and Raytheon are out.
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Apple’s  (AAPL) - Get Report upcoming stock split is forcing changes in the Dow Jones Industrial Average that will see three companies replaced in the venerable index.

S&P Dow Jones Indices said in a statement that ExxxonMobil  (XOM) - Get Report will be replaced by Salesforce.com  (CRM) - Get Report; Pizer  (PFE) - Get Report will be replaced by Amgen  (AMGN) - Get Report and Raytheon Technologies  (RTX) - Get Report will be replaced by Honeywell International  (HON) - Get Report.

“The index changes were prompted by DJIA constituent Apple Inc.'s decision to split its stock 4:1, which will reduce the index's weight in the Global Industry Classification Standard (GICS) Information Technology sector. The announced changes help offset that reduction,” S&P Dow Jones Indices said in a statement. The changes “also help diversify the index by removing overlap between companies of similar scope and adding new types of businesses that better reflect the American economy."

Apple’s stock split takes effect at the end of the day on Friday, Aug. 28. The index changes become effective prior to the opening of trading on Monday, Aug. 31, according to the statement.

Apple became the first company to top $2 trillion in market capitalization last week.

Salesforce.com, headquartered in San Francisco, develops enterprise cloud computing solutions with a focus on customer relationship management.

Amgen, based in Thousand Oaks, Calif., is a biotechnology company that discovers, develops, manufactures, and delivers human therapeutics.

Honeywell International, headquartered in Charlotte, N.C., delivers industry specific solutions that include aerospace products and services; control technologies for buildings and industry; and performance materials.

“The changes won’t disrupt the level of the index,” according to the statement. The divisor used to calculate the index from the components’ prices “will be changed prior to the opening on Aug. 31. This procedure prevents any distortion in the index’s reflection of the portion of the U.S. stock market it is designed to measure.”

Because the Dow Jones Industrial Average is a price-weighted index, Apple, whose shares closed above $500 for the first time Monday, has a larger influence on its price movements than lower priced constituents. After the split, Apple shares will likely be trading around $125, based on Monday’s close. That’s well below other Dow components such as Goldman Sachs  (GS) - Get Report, McDonald’s  (MCD) - Get Report and Microsoft  (MSFT) - Get Report.

The Dow rose 378 points to close at 28,269 Monday.  

Apple, Honeywell, Salesforce, Goldman Sachs and Microsoft are holdings in Jim Cramer's Action Alerts PLUS member club