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Dividend Discount Model

The dividend discount model is a method of valuing a company's stock price based on the theory that its stock is worth the sum of all of its future dividend payments, discounted back to their present values.

The stock value equals the initial dividend amount divided by the difference between the discount rate and the dividend growth rate.

Formula

QuantityVariable["value", "Money"] == QuantityVariable["div", "Money"]/(QuantityVariable["d", "Unitless"] - QuantityVariable["g", "Unitless"])

symbol description physical quantity
value stock value "Money"
div initial dividend amount "Money"
d discount rate "Unitless"
g dividend growth rate "Unitless"

Forms

Examples

Get the resource:

In[1]:=
ResourceObject["Dividend Discount Model"]
Out[1]=

Get the formula:

In[2]:=
FormulaData[ResourceObject["Dividend Discount Model"]]
Out[2]=

Use some values:

In[3]:=
FormulaData[ ResourceObject[ "Dividend Discount Model"], {QuantityVariable["value","Money"] -> 100, QuantityVariable["d","Unitless"] -> Quantity[10, "Percent"], QuantityVariable["div","Money"] -> 1}]
Out[3]=

Source Metadata

  • Creator:
  • Contributor:
  • Date: 1956

Publisher Information