Dividend Discount Model (DDM) Calculator
Dividend Discount Model (DDM)
Estimate intrinsic stock value using the Gordon Growth Model.
Intrinsic Value per Share
₹262.50
Next Year Expected Dividend (D1)
₹10.50
What to do next
Based on your Dividend Discount Model (DDM) Calculator, here are the tools you should try next:
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Gordon Growth Dividend Discount Formula
Estimates intrinsic stock value based on expected next-year dividends and constant dividend growth rate assumptions.
Worked Example: Dividend ₹10 per share growing at 5% p.a., with a 9% cost of equity
Dividend Discount Model: Valuing stable dividend-paying companies
Priya wanted to value a stable utility company paying a dividend of ₹10 per share, which was growing consistently at 5% p.a. Her required cost of equity return was 9%.
Using the DDM model, she calculated the intrinsic value of the stock to be ₹262.50 per share. Since the market price was ₹240, she bought the undervalued shares.
The Dividend Discount Model (DDM) values a stock based on the present value of all its future dividend payouts.
This valuation model is ideal for mature, stable firms with predictable dividend histories, but is not suitable for high-growth tech firms.
Frequently Asked Questions
What is the Dividend Discount Model (DDM)?
DDM is a quantitative valuation method that estimates the intrinsic value of a company based on the theory that its stock is worth the sum of all its future dividend payments, discounted to their present value.
What are the limitations of the DDM?
The model is useless for companies that do not pay dividends (like most growth tech stocks) and makes rigid assumptions about constant dividend growth rates.
What is the Gordon Growth Model?
The Gordon Growth Model is the most common variation of the DDM, which assumes that dividends will grow at a constant rate infinitely.
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