Dividend Discount Model (DDM) Calculator

This calculator helps investors determine the intrinsic value of a stock based on its expected future dividends. It is aimed at finance professionals and investors looking to assess stock valuation efficiently.

Calculator

Results

Intrinsic Value $0.00

Data Source and Methodology

All calculations are based on financial theories and formulas. For further reading, refer to Finology's DCF Guide.

The Formula Explained

The Dividend Discount Model formula is:

$$ P_0 = \frac{D_1}{r - g} $$

Where \( P_0 \) is the intrinsic value, \( D_1 \) is the expected dividend per share, \( r \) is the discount rate, and \( g \) is the growth rate.

Glossary of Terms

  • Annual Dividend ($): The monetary amount paid to shareholders annually.
  • Growth Rate (%): The expected annual increase in dividends.
  • Discount Rate (%): The investor's required rate of return.
  • Intrinsic Value: The calculated value of the stock based on future dividends.

FAQ

What is the Dividend Discount Model?

The DDM is a method used to value a stock by using predicted dividends and discounting them to present value.

Why use DDM for stock valuation?

DDM helps investors determine if a stock is overvalued or undervalued based on its dividend payouts.

What if the growth rate equals the discount rate?

If the growth rate equals the discount rate, the DDM formula is not applicable as it results in a division by zero.

Can DDM be used for all stocks?

DDM is most effective for companies that pay regular dividends. For non-dividend paying stocks, other valuation models should be used.

How accurate is the DDM?

DDM accuracy depends on the accuracy of the growth and discount rates. It assumes dividends will grow at a constant rate forever.

Audit: Complete
Formula (LaTeX) + variables + units
This section shows the formulas used by the calculator engine, plus variable definitions and units.
Formula (extracted LaTeX)
\[','\]
','
Formula (extracted LaTeX)
\[P_0 = \frac{D_1}{r - g}\]
P_0 = \frac{D_1}{r - g}
Formula (extracted text)
$ P_0 = \frac{D_1}{r - g} $
Variables and units
  • No variables provided in audit spec.
Sources (authoritative):
Changelog
Version: 0.1.0-draft
Last code update: 2026-01-19
0.1.0-draft · 2026-01-19
  • Initial audit spec draft generated from HTML extraction (review required).
  • Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
  • Confirm sources are authoritative and relevant to the calculator methodology.
Verified by Ugo Candido on 2026-01-19
Profile · LinkedIn
, ', svg: { fontCache: 'global' } };

Dividend Discount Model (DDM) Calculator

This calculator helps investors determine the intrinsic value of a stock based on its expected future dividends. It is aimed at finance professionals and investors looking to assess stock valuation efficiently.

Calculator

Results

Intrinsic Value $0.00

Data Source and Methodology

All calculations are based on financial theories and formulas. For further reading, refer to Finology's DCF Guide.

The Formula Explained

The Dividend Discount Model formula is:

$$ P_0 = \frac{D_1}{r - g} $$

Where \( P_0 \) is the intrinsic value, \( D_1 \) is the expected dividend per share, \( r \) is the discount rate, and \( g \) is the growth rate.

Glossary of Terms

  • Annual Dividend ($): The monetary amount paid to shareholders annually.
  • Growth Rate (%): The expected annual increase in dividends.
  • Discount Rate (%): The investor's required rate of return.
  • Intrinsic Value: The calculated value of the stock based on future dividends.

FAQ

What is the Dividend Discount Model?

The DDM is a method used to value a stock by using predicted dividends and discounting them to present value.

Why use DDM for stock valuation?

DDM helps investors determine if a stock is overvalued or undervalued based on its dividend payouts.

What if the growth rate equals the discount rate?

If the growth rate equals the discount rate, the DDM formula is not applicable as it results in a division by zero.

Can DDM be used for all stocks?

DDM is most effective for companies that pay regular dividends. For non-dividend paying stocks, other valuation models should be used.

How accurate is the DDM?

DDM accuracy depends on the accuracy of the growth and discount rates. It assumes dividends will grow at a constant rate forever.

Audit: Complete
Formula (LaTeX) + variables + units
This section shows the formulas used by the calculator engine, plus variable definitions and units.
Formula (extracted LaTeX)
\[','\]
','
Formula (extracted LaTeX)
\[P_0 = \frac{D_1}{r - g}\]
P_0 = \frac{D_1}{r - g}
Formula (extracted text)
$ P_0 = \frac{D_1}{r - g} $
Variables and units
  • No variables provided in audit spec.
Sources (authoritative):
Changelog
Version: 0.1.0-draft
Last code update: 2026-01-19
0.1.0-draft · 2026-01-19
  • Initial audit spec draft generated from HTML extraction (review required).
  • Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
  • Confirm sources are authoritative and relevant to the calculator methodology.
Verified by Ugo Candido on 2026-01-19
Profile · LinkedIn
]], displayMath: [['\\[','\\]']] }, svg: { fontCache: 'global' } };, svg: { fontCache: 'global' } };

Dividend Discount Model (DDM) Calculator

This calculator helps investors determine the intrinsic value of a stock based on its expected future dividends. It is aimed at finance professionals and investors looking to assess stock valuation efficiently.

Calculator

Results

Intrinsic Value $0.00

Data Source and Methodology

All calculations are based on financial theories and formulas. For further reading, refer to Finology's DCF Guide.

The Formula Explained

The Dividend Discount Model formula is:

$$ P_0 = \frac{D_1}{r - g} $$

Where \( P_0 \) is the intrinsic value, \( D_1 \) is the expected dividend per share, \( r \) is the discount rate, and \( g \) is the growth rate.

Glossary of Terms

  • Annual Dividend ($): The monetary amount paid to shareholders annually.
  • Growth Rate (%): The expected annual increase in dividends.
  • Discount Rate (%): The investor's required rate of return.
  • Intrinsic Value: The calculated value of the stock based on future dividends.

FAQ

What is the Dividend Discount Model?

The DDM is a method used to value a stock by using predicted dividends and discounting them to present value.

Why use DDM for stock valuation?

DDM helps investors determine if a stock is overvalued or undervalued based on its dividend payouts.

What if the growth rate equals the discount rate?

If the growth rate equals the discount rate, the DDM formula is not applicable as it results in a division by zero.

Can DDM be used for all stocks?

DDM is most effective for companies that pay regular dividends. For non-dividend paying stocks, other valuation models should be used.

How accurate is the DDM?

DDM accuracy depends on the accuracy of the growth and discount rates. It assumes dividends will grow at a constant rate forever.

Audit: Complete
Formula (LaTeX) + variables + units
This section shows the formulas used by the calculator engine, plus variable definitions and units.
Formula (extracted LaTeX)
\[','\]
','
Formula (extracted LaTeX)
\[P_0 = \frac{D_1}{r - g}\]
P_0 = \frac{D_1}{r - g}
Formula (extracted text)
$ P_0 = \frac{D_1}{r - g} $
Variables and units
  • No variables provided in audit spec.
Sources (authoritative):
Changelog
Version: 0.1.0-draft
Last code update: 2026-01-19
0.1.0-draft · 2026-01-19
  • Initial audit spec draft generated from HTML extraction (review required).
  • Verify formulas match the calculator engine and convert any text-only formulas to LaTeX.
  • Confirm sources are authoritative and relevant to the calculator methodology.
Verified by Ugo Candido on 2026-01-19
Profile · LinkedIn