Walmart (WMT) investors are preparing for a stock split later this week.

For the 12th time in 50 years, Walmart will conduct a stock split in an effort to make shares more affordable for its employees. Walmart last conducted a 2-for-1 stock split on April 20, 1999. This time, it will be the company’s first 3-for-1 stock split.

Here’s how it will work: Shares issued in the stock split will be paid out after the market closes on Friday, February 23 for investors who own shares of the retailer “at the close of business” on Thursday, February 22. On February 26, at the market open, Walmart will begin trading after the split.

This split will increase the number of Walmart common shares outstanding to approximately 8.1 billion from 2.7 billion shares before the split. Although the shares will trade at a lower price, the underlying value of existing investments in the company will not change.

In a note to clients, CFRA analyst Arun Sundaram explained that the action is “purely cosmetic” with no “impact on fundamentals.” However, he noted, stock splits “are perceived as a shareholder-friendly move and a sign of confidence.”

NEW YORK, NEW YORK - MAY 30: The Walmart company logo is displayed as traders work on the floor of the New York Stock Exchange during morning trading on May 30, 2023 in New York City.  The stock market opened slightly higher as the Biden administration and Republican lawmakers reached a tentative deal on raising the U.S. debt ceiling to avoid a default, with Congress set to vote on the legislation as soon as the Wednesday.  (Photo by Michael M. Santiago/Getty Images)

The Walmart company logo is displayed as traders work on the floor of the New York Stock Exchange during morning trading on May 30, 2023, in New York City. (Michael M. Santiago/Getty Images) (Michael M. Santiago via Getty Images)

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Why Walmart decided to issue shares now

Walmart CEO Doug McMillon said the timing of the stock split made sense given Walmart’s future growth plans, which it announced at its last annual meeting.

Sundaram pointed to other recent company announcements, such as a pay increase for store managers from $117,000 a year to $128,000 a year, with bonuses of up to 200% of base salary. Walmart also announced a $9 billion investment to modernize stores, which it said “should help drive traffic and volume growth…and help offset declining average ticket growth.” .

Paying tribute to founder Sam Walton, McMillon said he wants all employees to feel part of Walmart’s story, writing in a statement: “As Sam said, ‘We’re all in this together. That’s the secret.'”

Babson College Principal Laurie Krigman said there are three reasons why the company would decide to split the stock.

First of all, it indicates “confidence” in the future of the company. Second, it reduces the stock price to the “preferred trading range.” The third reason is liquidity, where “more shares are traded, even though the same amount of dollars are traded,” Krigman said.

“It just made sense to do a stock split,” Jefferies analyst Corey Tarlowe told Yahoo Finance. “And this way, it becomes a little more accessible to other employees, and it’s all about value and affordability, which is really core to their culture.”

What it means for Walmart stock

Walmart stock has been getting a lot of buzz lately. The retailer’s stock hit a record high on Feb. 20 following the company’s earnings report and stock split announcement.

Some see the stock split as a positive catalyst, as more retail investors can afford lower-priced stocks after the split.

“We view (the stock split) as increasingly positive for WMT’s growth and multiple expansion prospects,” Tarlowe said.

However, it has not always been this way. Since 1975, Walmart stock has returned positive returns in the three months following a stock split six out of nine times.

And in general, the history is quite mixed. For example, Walmart returned 73% in the three months after its stock split in July 1982. But Walmart shares fell 20% in the three months after the 2-for-1 split in February 1993.

In the end, Krigman offered a warning to potential investors: Make sure you understand the company’s fundamentals and performance first.

“It doesn’t really mean anything,” Krigman said of the stock split. “It’s an accounting trick.”

Krigman reminded investors who own shares that after the split, “they are financially in exactly the same position.”

Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or email him at bdipalma@yahoofinance.com.

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By Sam