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Dividend Discount Model Calculator
Value a share from its dividends with the Gordon growth model.
How the Dividend Discount Model Works
The Gordon Growth Formula
D₁ = D₀ × (1 + g)
A share is worth the present value of its future dividends. If those dividends grow at a constant rate g forever and you discount at your required return r, the infinite series simplifies to this single expression.
The r > g Rule
The required return must exceed the growth rate. If g approaches r, the denominator approaches zero and the fair value explodes — a sign the constant-growth assumption has broken down. Use a growth rate no higher than the long-run economy can sustain.
DDM in the Valuation Toolkit
Where r Comes From
Estimate the required return with the CAPM calculator — risk-free rate plus beta times the equity risk premium.
When to Use a DCF Instead
For companies that reinvest rather than pay out, value the whole cash-flow stream with a DCF rather than dividends alone.
Discounting a Whole Firm
The DDM discounts dividends at your cost of equity. A DCF values the whole firm, so it discounts at the weighted average cost of capital — cost of equity and after-tax cost of debt, blended by capital structure.
Fair Value Is Not a Buy Price
A DDM fair value is one estimate built on your assumptions. Cross-check it against Graham's intrinsic value formula, then require a margin of safety below it before acting.
Want deeper insights?
This calculator values a single stock from dividend assumptions you supply. ARIA combines dividend, cash-flow, and risk-based valuation across every holding with live data — valuing income and growth stocks on a consistent footing, not one stock by hand.
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