Updated: April 12, 2022
The present value of stock can also be found using the Discounted Dividend Model. The Dividend Discount Model uses the present value of the stock, the expected future dividends, and the growth rate.
Click here to download the DDM template
This model is similar to the Constant Growth Model accept it discounts the dividends at the expected return instead of discounting the free cash flows at the weighted average cost of capital.
The dividend discount model is a model that uses the present value of the stock, the expected future dividends, and the growth rate.
The dividend discount model is calculated by using the present value of the stock, the expected future dividends, and the growth rate.
There are three types of dividend discount models: the constant growth model, the exponential decay model, and the geometric average model.
Investors can use the dividend discount model to find the present value of a stock.
The dividend discount model is not as accurate as other models, such as the constant growth model. Additionally, it does not take into account taxes and dividends are not always paid out in cash.