Walmart's 3-for-1 stock split: What investors need to know

Walmart (WMT) will conduct its first 3-for-1 stock split on Friday in an effort to make its stock more affordable for employees. The company will increase outstanding stock to 8.1 billion shares. The stock price will be lower, but the value of the shares an investor holds will remain the same.

Yahoo Finance Reporter Brooke DiPalma joins Yahoo Finance to break down the latest development for Walmart and what it means for the company and the stock moving forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

AKIKO FUJITA: Well, Walmart is gearing up for another historic stock split. The largest US retail investors-- US retail investors will carry out a stock split on Friday in an effort to make shares more affordable for its employees. Let's bring in Brooke DiPalma with the details. Brooke.

BROOKE DIPALMA: Good morning, Akiko. That's right. For the 12th time in 50 years, Walmart will be conducting the stock split. Now, the last time this happened, well, it's been quite a while. The last two-for-one stock split happened in April of 1999. And this will be the first three-for-one stock split. And so here's how it works. Shares will be issued after market close on Friday, February 23. But investors need to know that they must own shares at close of business today, on Thursday, February 22. Then on Monday, February 26, that market open, Walmart will begin trading on a post split basis.

Now, other things worth noting is that this will increase the number of shares of Walmart's outstanding common stock to 8.1 billion. That's up from 2.7 billion. And it's important to note while the stock will trade at a lower price, it will not change the underlying value of investments within the Walmart company. Very important to note that there. And it's important also to note that investors have to understand the fundamentals of the company before they jump in. There's been a lot of buzz about this.

RACHELLE AKUFFO: So then, Brooke, with that in mind and being that we're still in the thick of earnings season and some uncertainty still ahead in terms of the consumer, why now? Why have this three-for-one stock split now?

BROOKE DIPALMA: Yeah. Well, Walmart CEO Doug McMillon really trying to frame this as a way for all employees to jump in and buy shares of the company, giving a nod to their founder Sam Walton, who always wanted to write a story where employees really felt like they were a part of this bigger, grand story of the robust Walmart that is. And so they're really looking to say that we're all in this together, and that was the secret that Sam Walton kept very close.

Now, analysts do see this as a positive catalyst, really looking at that positive growth story that Walmart is trying to put out there. But in addition to that, as we see with all stock splits, it's important to note that this is simply a cosmetic play here. One director from Babson College even telling Yahoo Finance that a stock split is simply an accounting gimmick even. But she did want to note that there are three reasons behind this decision.

First, as I noted before, this really does signal a sign of confidence in the future of Walmart's growth story. We know that they really are ramping up growth as of late and most recently announced at their last annual meeting. Second, this brings down the stock price. So more preferred trading range. Once again, Walmart really trying to get in all employees to buy shares. And lastly, we also share that this is jumping from roughly 2 billion to 8 billion outstanding common stock shares. And so really the third reason here is liquidity with more shares trading even though it is the same dollar amount that's trading.

And we can't emphasize enough if you're looking to jump in now, be sure that you understand research and really do understand the fundamentals of the Walmart company before you buy into this hype.