Dividend Discount Model (DDM) Calculator

Calculate intrinsic value using the Gordon Growth Model for dividend-paying stocks

Dividend Data

Current Annual Dividend Per Share

Find on Yahoo Finance → Statistics → Forward Annual Dividend Rate

Find on Yahoo Finance → Statistics

Expected Dividend Growth Rate

The expected annual growth rate of dividends. For stable dividend stocks, this is typically 2-8%. Check historical dividend growth for reference.

Historical dividend growth rate (typically 2-8%)

Required Rate of Return

Your expected return / discount rate. This should be higher than the growth rate. 8-12% is typical for equity investments.

Your expected return / discount rate

Current Stock Price (Optional)

Enter the current market price to see margin of safety and valuation status.

For margin of safety calculation

Gordon Growth Model Formula:

Intrinsic Value = D₁ / (r - g)

D₁ = Next year's dividend, r = required return, g = growth rate

Valuation Results

Enter dividend data to see valuation

Annual dividend is required

Understanding the Dividend Discount Model

What is the Gordon Growth Model?

The Gordon Growth Model (also called the Dividend Discount Model or DDM) is a method for valuing dividend-paying stocks. It calculates the present value of all future dividends, assuming they grow at a constant rate forever. The formula is: Intrinsic Value = D₁ / (r - g), where D₁ is next year's dividend, r is your required rate of return, and g is the expected dividend growth rate.

Best Used For

Stable, mature dividend-paying companies
Companies with consistent dividend growth history
Utility companies, REITs, and dividend aristocrats
Blue-chip stocks with predictable cash flows

Why Growth Rate Must Be Less Than Required Return

Mathematically, if g ≥ r, the formula produces infinite or negative values, which doesn't make sense. Economically, no company can grow dividends faster than the overall economy forever. If a stock's dividend grows faster than your required return indefinitely, it would eventually become worth more than the entire economy - an impossibility.

Limitations

Not suitable for non-dividend paying stocks (like growth stocks)
Assumes constant dividend growth rate forever (unrealistic)
Very sensitive to growth rate and required return inputs
Doesn't account for changing business conditions
May undervalue companies with temporarily low dividends

This calculator is for educational purposes only. Not financial advice.

Always conduct thorough research before making investment decisions.

Free DDM Calculator by Money365.Market

Educational purposes only. Not financial advice.