Dividend Discount Model Calculator
Dividend Growth Rate =
Rate of Return =
Stock Price =
The Dividend Discount Model or DDM values the price of a stock by discounting expected dividends to the present value. If the price obtained is higher than the actual trading price then the stock is undervalued.
- Dividend: current dividend
- Dividend Growth Rate: expected growth rate, in perpetuity, of the dividend
- Rate of Return: required rate of return expressed as a percentage
- Stock Price: value of the stock
A stock's dividend is $4.25 and is growing 5% per year. If the rate of return is 10% and the current stock price is $75 per share, is this stock undervalued?
- Dividend: 4.25
- Dividend Growth Rate: 5.000%
- Rate of Return: 10.000%
The calculated stock price is $85 per share which means, according to this model, the stock is undervalued.
Dividend Growth Rate
Rate of Return