Skip to main content
All CollectionsExtra ToolsValuation Methods
Dividend Discount Model (DDM)
Dividend Discount Model (DDM)

Learn about how to use the DDM valuation method

S
Written by Support
Updated over 2 weeks ago

Navigate to the "Extra Tools" Page

On the left-hand navigation bar, click "Extra Tools". The page will load to a new site with 3 options: Dividend Snowball Calculator, Valuation Calculator, and Dividend News.

After, click on "Valuation Calculator"

At the top, click on "Dividend Discount Model (DDM)"

Enter the Current Share Price, Annual Dividend Per Share, Expected future dividend growth rate, Total Years to Simulate, and discount rate. Click the "Calculate" button. The output will show below. This includes the Intrinsic Value and the percentage Undervalued or Overvalued. That percentage is based on the difference between the current price and calculated intrinsic value.

Formula Explained

PV = Present Value of Future Dividends ($)

D = Annual Dividend Per Share ($)

g = Reasonable Annual Growth Rate of Dividend

n = The Number of Years Simulated in the Model

k = Discount Rate (US Treasury Bonds, AAA Corporate Bonds, WACC, S&P 500 Return, etc)

​Warning:

Make sure to invest with a strong margin of safety. Inputs need to be realistic and may prove to be inaccurate (Garbage In/Garbage Out).
​

Video Explanation

Did this answer your question?