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Coca-Cola recommends first stock split since 1996

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CANDICE CHOI | April 25, 2012 04:54 PM EST | AP

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NEW YORK — The Coca-Cola Co. is seeking its first stock split in 16 years.

The world's biggest beverage maker said Wednesday the 2-for-1 split is in line with its plan to double revenue over this decade. The Atlanta-based company's stock began trading in 1919. Since then, the stock has been split only 10 other times.

Companies split stocks when they think their share price has gotten too expensive or if the stock is trading too far above similar companies' stock.

If approved, Coke's split would increase the number of its shares to 11.2 billion from 5.6 billion. Shareholders would receive one additional share of stock for each share held in early August.

The move is subject to approval by shareowners on July 10.

Coca-Cola, which has more than 500 brands including Sprite, Minute Maid, Dasani and Powerade, last week reported another strong first-quarter performance that topped Wall Street expectations. The company attributed the results to increased sales at home and abroad, but noted that the biggest gains came from emerging markets like China and India.

Another aspect of Coca-Cola's success in recent years has been its ability to deftly manage rising commodity costs. To avoid scaring off price-sensitive customers, Coke has instead focused on offering a variety of smaller drink sizes that have higher profit margins.

Those smaller sizes are often welcomed by health conscious consumers as well.

Shares of Coke closed up 81 cents at $74.93 amid broader market gains; the stock is up about 7 percent year to date. Since the last split in 1996, the stock's all-time high of $88.94 was set on July 15, 1998, according to Fact Set.

If the latest proposed split is approved, the company noted that a single share purchased in 1919 for $40 would be worth more than 9,000 shares and $341,545. If dividends were reinvested annually, the share would be worth $9.8 million.

Stock splits have become less common in recent years as investors have grown more accustomed to higher share prices, said Howard Silverblatt, senior index analyst at Standard & Poor's.

The average share price in the S&P 500 is currently $57.13. In 1980, the average share price was $37.40.

Silverblatt said splits also help companies with liquidity because there is usually an immediate bump in the price after the split.

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