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Published On:Wednesday, 11 January 2012
Posted by Muhammad Atif Saeed

Dividend Discount Model - DDM

A procedure for valuing the price of a stock by using predicted dividends and discounting them back to present value. The idea is that if the value obtained from the DDM is higher than what the shares are currently trading at, then the stock is undervalued.
Dividend Discount Model (DDM)

explains 'Dividend Discount Model - DDM'

This procedure has many variations, and it doesn't work for companies that don't pay out dividends. For example one variation is the supernormal dividend growth model which takes into account a period of high growth followed by a lower, constant growth period. The principal behind the model is the net present value of the cash flows. To get a growth number, one option is to take the return on equity (ROE) and multiply it by the retention ratio (which is 1-the payout ratio).

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Posted by Muhammad Atif Saeed on 20:36. Filed under , . You can follow any responses to this entry through the RSS 2.0. Feel free to leave a response

By Muhammad Atif Saeed on 20:36. Filed under , . Follow any responses to the RSS 2.0. Leave a response

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I am doing ACMA from Institute of Cost and Management Accountants Pakistan (Islamabad). Computer and Accounting are my favorite subjects contact Information: +923347787272 atifsaeedicmap@gmail.com atifsaeed_icmap@hotmail.com

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