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Dividend Discount Model Calculator.

Estimate value with the constant-growth Gordon dividend model.

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Results update as you type.

Intrinsic value per share: $33.33 $

Intrinsic value per share

$0.00$
Return minus growth: 6.00%

Return minus growth

0.00%

FAQs

How is Dividend Discount Model calculated?

The model requires required return greater than growth and is not a price prediction.

Use Cases

Stock Valuation for Dividend Investors

Helps dividend-focused investors estimate whether a stock is fairly priced based on expected future dividends and their required return.

Example: If a stock pays a $2 dividend, grows at 5% annually, and you require a 10% return, the intrinsic value is $40.

Comparing Investment Opportunities

Allows investors to compare the intrinsic values of multiple dividend-paying stocks to identify potentially undervalued ones.

Example: Compare two stocks with different dividend yields and growth rates to see which offers better value relative to price.

Frequently Asked Questions

What is the Dividend Discount Model (DDM)?
The Dividend Discount Model (DDM) estimates the intrinsic value of a stock based on the present value of its expected future dividends. The constant-growth version, also known as the Gordon Growth Model, assumes dividends grow at a constant rate indefinitely. The formula is: Value = Dividend per share / (Required rate of return - Dividend growth rate).
What inputs does the calculator require?
The calculator requires three inputs: the expected dividend per share (usually the next year's dividend), the required rate of return (the investor's required annual return), and the constant dividend growth rate. These are used to compute the intrinsic share value.
What does the result tell me?
The result is an estimate of the intrinsic value per share. If this value is higher than the current market price, the stock may be undervalued; if lower, it may be overvalued. However, the model is sensitive to assumptions and is best used for companies with stable dividend growth.

Tips & Common Mistakes

Tips

  • Use realistic growth rates based on historical dividend growth and company fundamentals.
  • Ensure the required rate of return is higher than the dividend growth rate; otherwise, the model breaks down.
  • For companies with unstable dividends, consider using a multi-stage DDM instead.
  • Remember that the model assumes constant growth forever, which is rarely true in practice.

Common Mistakes to Avoid

  • Using the current dividend instead of the expected next year's dividend, which can undervalue the stock.
  • Setting the growth rate too high relative to the required return, leading to unrealistic valuations.
  • Ignoring the model's limitations for companies with irregular dividend policies or high growth phases.

Last updated: August 13, 2026