Value a Stock by Its Dividend Stream

The DDM values a stock as the present value of all future dividends. Best for stable dividend-paying companies like utilities and banks.

DDMDividendsGordon Growth ModelEquity Value

Live Result

50.00

ƒ: D1 / (ke - g)raw: 50.0000

ƒ(x)

Use variable names from the panel above (e.g. FV, r, n) — or type numbers directly: 10000 / (1 + 0.08)^10

Expected dividend in Year 1

D1 = 3

ke% as decimal

Cost of equity (required return)

ke = 0.10

g% as decimal

Perpetual dividend growth rate (must be < ke)

g = 0.04

Current dividend (just paid)

D0 = 2.88

💡 You can also enter values directly in the formula: 10000 / (1 + 0.08)^10

⬇ Export Calculation

Exports a plain .txt file with your expression, formula, all variable values, result, and educational notes — ready to paste into any report, Word doc, Notion, or Google Docs.

The exported file includes the formula in standard mathematical notation — you can paste it directly into Excel, Google Sheets, or back into FinanceSheep.

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Learn: Value a Stock by Its Dividend Stream

Equity Valuation Models · Educational Guide

The Core Idea

When you buy a stock, you are buying a claim on future profits returned to you as dividends. The DDM asks a simple question: what are all those future dividends worth today?

How It Works

Stock value = D1 / (ke − g). D1 = next year's dividend. ke = your required return. g = perpetual dividend growth rate. If dividends grow at 4% forever and you require 10% return, each $1 of next year's dividend is worth $1/(0.10−0.04) = $16.67 today.

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Real-World Example: A utility stock just paid a $2.88 dividend. Dividends grow 4% per year. Required return = 10%. D1 = 2.88 × 1.04 = $3. Stock value = $3 / (0.10 − 0.04) = $3 / 0.06 = $50.

Value a Stock by Its Dividend Stream

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