Dividend Discount Model (DDM)

The Dividend Discount Model (DDM) is a stock valuation method that estimates intrinsic value as the present value of all future dividends. It is most appropriate for mature, dividend-paying companies with stable and predictable payout histories.

公式

範例

A utility paying $3.00 in annual dividends, with a 9% required return and 3% dividend growth rate, has a DDM intrinsic value of $3.00 / (0.09 − 0.03) = $50. This stock valuation method only works reliably for stable dividend payers.

為什麼重要

DDM provides a disciplined stock valuation framework for income-focused investors. Understanding DDM also helps you appreciate why DCF is preferred for growth companies — DDM simply cannot value businesses that reinvest most earnings rather than distributing them.

MiniValuator 如何使用 Dividend Discount Model (DDM)

MiniValuator focuses on FCF-based DCF stock valuation, but references DDM in comparison articles to explain when each method is most appropriate. Our compare page covers DCF vs DDM in detail.

相關術語

• Discounted Cash Flow (DCF) — Discounted Cash Flow (DCF) is a fundamental stock valuation methodology that estimates the present v...
• Intrinsic Value — Intrinsic value is the estimated true worth of an asset based on its fundamental economic characteri...
• Terminal Value — Terminal value represents the present value of all future cash flows beyond the explicit forecast pe...
• Perpetuity Growth Rate — The perpetuity growth rate (also called the terminal growth rate) is the constant rate at which a co...

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