Dividend Discount Model (DDM) Calculator
The Dividend Discount Model Calculator determines the fair value of a stock based on the present value of expected future dividends. Considers current dividend, required rate of return and dividend growth rate to calculate theoretical price. Essential tool for investors, financial analysts and portfolio managers who need to evaluate stock attractiveness, make investment decisions and compare market prices with calculated intrinsic values.
Leave blank if no dividend growth is expected
Calculation Details
The Dividend Discount Model (DDM) is a valuation method that calculates the fair value of a stock based on the present value of expected future dividends. It assumes that the value of a stock is equal to the present value of all future dividends discounted by the investor's required rate of return.
The DDM is most suitable for mature companies that pay consistent dividends. The required rate of return must be greater than the dividend growth rate for the model to work correctly. This model does not consider other factors such as earnings growth or liquidation value.
Formulas
Fair Value = Dividend ÷ (Required Rate of Return - Growth Rate)
Dividend Discount Model Types
Zero Growth DDM
Applies to companies that pay constant dividends without growth. Formula: Value = Dividend ÷ Required Rate of Return. Ideal for mature companies in stable sectors.
Constant Growth DDM (Gordon)
Applies to companies with constant dividend growth. Formula: Value = Dividend × (1 + Growth Rate) ÷ (Required Rate - Growth Rate). Most common and realistic for most companies.
Multi-Stage DDM
Applies to companies with different growth phases. Considers periods of high growth followed by stable growth. More complex but more accurate for developing companies.
Related Calculators
Dividend Yield Calculator
Calculate the dividend yield of your stocks instantly by entering dividend per share and current price. Perfect for investors assessing returns.
Dividend Payout Ratio Calculator
Calculate dividend payout ratio and evaluate payment sustainability. Determine how much of net income is distributed as dividends.