Dividend Discount Calculator: calculate dividend discount for your business. Formula, benchmarks, and practical tips included.
Gordon Growth Model: P = D₁ ÷ (ke − g)
where D₁ = next year expected dividend = D₀ × (1 + g), ke = required return on equity, g = constant perpetuity growth rate (must be less than ke).
Multi-stage DDM: For companies with a high-growth phase followed by stable growth, discount each high-growth period dividend separately, then apply the Gordon model to the terminal dividend.
Worked example: D₀ = 2.40. g = 4%. D₁ = 2.40 × 1.04 = 2.496. ke = 10% (estimated via CAPM). Intrinsic value = 2.496 ÷ (0.10 − 0.04) = 2.496 ÷ 0.06 = 41.60. If the current share price is 38.00, the stock appears undervalued by approximately 9.5% at these assumptions.