As our Tim Kiladze pointed out earlier today, companies that announce stock splits often see an initial jump in their share value - even if the longer-term impact can be negligible.
That could mean some short-term trading opportunities for investors that can make accurate predictions on stocks that are about to do the splits.
CIBC World Markets has compiled a list of TSX stocks that it thinks are the most likely to do just that.
An analysis conducted by the bank found that firms in the past that opted to split shares tend to exhibit three characteristics:
1. Their share prices are usually two times higher than the market average. As of this month, the average share price in the S&P/TSX composite index is roughly $31, implying that a stock with a price of $60 or higher are the ones most likely to announce a split.
2. Splitters usually exhibit strong operating performance relative to the market in the year prior to splitting. CIBC measures this using several criteria, including earnings, revenue and dividend growth over the past two to five years. It also looks at return on equity.
3. Splitters tend to show a sharp increase in their share price in the year prior to a split.
CIBC screened for stocks meeting all this criteria and came up with a list of 14. It's worth pointing out that West Fraser Timber, National Bank and Toronto Dominion Bank -- all of which recently announced splits -- would have made this list.
Click here to see the list of stocks.