Dividend Discount Model

Knowledge Center

What is the Dividend Discount Model?

The Dividend Discount Model is a valuation technique that estimates the price a stock will be trading by calculating the Net Present Value of all expected future dividend payments discounted by an appropriate risk-adjusted rate.

Two well-known variants of this model are:

• Stable model. Best suited for firms experiencing long-term stable growth, the model assumes the firm grows at a rate equal to the long-term nominal growth rate of the economy (inflation plus real growth in GDP).

• Two-stage model. Assumes that the company will experience a period of high-growth followed by a decline to a stable growth period.

Both variants are very sensitive to the assumptions made regarding growth rates, time frame, and the required rate of return.

Forum Forum about the Dividend Discount Model. Start a new topic about the Dividend Discount Model Sign up for free

Courses about the Dividend Discount Model. Beginners Course Advanced Course Course for Experts

Expert Tips Advanced insights about the Dividend Discount Model. Here you will find professional advices by experts. Consultancy Tips Teaching Tips Practical Implementation Tips

Information Sources Various sources of information regarding the Dividend Discount Model. Here you will find powerpoints, videos, news, etc. to use in your own lectures and workshops. How to Value Bonds and Stocks Bonds, Stock, Valuation of Bonds and Stocks The presentation expounds the valuation of bonds and stocks. It covers the following topics: 1. Definition and Example ...

Tools Useful tools regarding the Dividend Discount Model. News Videos Presentations   Books Academic More

Compare with: Net Present Value  |  Discounted Cash Flow  |  Dividend Payout Ratio

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing

More on Management  |  Return to Management Dictionary

This ends our Dividend Discount Model summary and forum.