Will Raytheon Stock Split?

Raytheon is a major U.S. defense contractor that specializes in missile defenses, command and control of artillery, aircraft and satellites, and cyber security among other complex electronic systems. The company was founded in 1922 by Laurence K. Marshall, Charles G. Smith and Vannevar Bush as a refrigeration company. Over the years, the company shifted its focus to advanced weapons systems. Currently, the U.S. Government is their biggest client. Raytheon stock is valued at over $57 billion but its stock has never split due to various factors.

What Is A Stock Split?

A stock split occurs when the management of a publicly traded company decides to issue more shares to current shareholders. In the case of a 2-for-1 split, stockholders will be given one additional share for each share they already have. So if you own 100 shares before the split, you will own 200 after. As a result, stock prices will go down by half. The market capitalization is unchanged.

Causes For A Stock Split

Companies may decide on a stock split when their individual share prices have risen too high, meaning small investors are able to afford to purchase shares.

A stock split may also occur when the company’s shares cost more than their competitors.

Companies want to preserve their liquidity, or the ability for investors to buy or sell assets without greatly affecting share prices. That’s why they decide to initiate a stock split.

Raytheon Stock History

Raytheon has never split its stock, and the company is currently thriving.

A financial analysis shows that an investor who purchased Raytheon stock ten years ago and reinvested the dividends would have seen a $10,000 starting investment grow to $47,516.56.

The average annual total return in this period was 16.87% as the share price rose from $55.82 to $203.46.

Without reinvesting the dividends, the $10,000 initial buy grew to $40,334.

Will Raytheon Stock Split?

Raytheon is in a unique position. As the 5th largest

defense contractor in the world and the third largest in the United States, the company is not threatened by competitors or lack of liquidity.

In addition to selling advanced weaponry to the United States Government, the company also sells systems to U.S. allies.

Although the market for its missile systems seems unending due to continual global conflicts, Raytheon has also invested in emerging defense technologies to protect its market position.

In addition, the U.S. government may try to exert pressure on the company to lower prices, but since it needs Raytheon’s “unmatched” missile defenses, bargaining power is limited.

All of these factors mean that a Raytheon stock split is not on the horizon and the company probably would not benefit from one at the current time.

Should it face growing competition or its stock price were to rise abruptly, management may reconsider the current position.

The bottom line is if you are waiting to buy stock until it splits, you may have a long wait.

Raytheon is thriving as are other defense contractors, in no small part due to increased United States military spending. The market for missile systems in particular have ensured their Raytheon is highly profitable resulting in an impressive rise in its share price over the last decade.

If you want to own Raytheon stock, probably best not wait for a split. In its over fifty year history, a Raytheon stock split has never occurred and looks unlikely anytime soon.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.