Dividend Discount Model

Knowledge Center

• About
• Home
• Dictionary
• Encyclopedia
• Question?
• Views

• Register
• Log in
• Help

• Change & Organization
• Communication & Skills
• Decision-making & Valuation
• Ethics & Responsibility
• Finance & Investing
• HRM
• Knowledge & Intangibles
• Leadership
• Marketing
• Program & Project
• Strategy
• Supply Chain & Quality

Description of Dividend Discount Model. Explanation.

Definition Dividend Discount Model. Description.

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.

Dividend Discount Model Forum Begin a new topic

Dividend Discount Model Special Interest Group Special Interest Group

Best Practices - Dividend Discount Model Premium

Expert Tips - Dividend Discount Model Premium

Resources - Dividend Discount Model Premium   News Dividend Discount Model         Videos Dividend Discount Model         Presentations Dividend Discount Model         More Dividend Discount Model

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.