dividend discount model investment & finance definition
A technique that estimates the price that a
stock should be trading at by calculating the present value of all future
dividends. The model assumes that dividends will grow at a constant rate and
that growth will continue for an infinite period. It also assumes that the
required rate of return is greater than the infinite growth rate.
See dividend discount model in Wall Street Words
A model used to determine the price at which a security should sell based on the discounted value of estimated future dividend payments. Dividend discount models are used to determine if a security is a good buy, such as one that sells at a lower current price than the model would indicate, or a bad buy, such as one that sells at a higher current price than the model would indicate.
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