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Apple CEO Tim Cook
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EXCLUSIVE CLUB

It’s official: Apple is joining the Dow Jones Industrial Average

By John McDuling

The most valuable company in the history of capitalism—in nominal terms, at least—is joining America’s oldest and most prestigious stock index.

Apple will be admitted to the Dow Jones Industrial Average this month, the Wall Street Journal is reporting, citing S&P Dow Jones Indices, which ultimately owns the Dow. It will replace AT&T on March 18.

This was widely anticipated. Apple did a 7-for-1 stock split in June last year, a move designed to make its shares (which before the split cost upwards of $600 each) “more accessible to a larger number of investors.” A by-product of this split is that it also made inclusion in the Dow more likely, because of the way the index is calculated.

The Dow is a price weighted index (i.e. based on the share prices of its components, which is a bit arbitrary), before the split it would have completely distorted the index. (By contrast, the S&P 500, which some people argue is the better benchmark for the stockmarket than the Dow, is based on the market values of its component companies.)

Being admitted to the Dow doesn’t really change anything for Apple on an operational level, but it is symbolic, signifying the resurgence of America’s tech sector, just as the Nasdaq’s crossing the 5,000 mark recently did.

Apple’s share price got a bit of a lift in pre-market trading, because the mutual funds and exchange traded funds that track the Dow will now have to add its shares to their portfolios.