model

This tool facilitates the valuation of a company’s stock based on a constant growth rate of its future dividends. It utilizes a mathematical formula that considers the current dividend per share, the required rate of return for the investor, and the expected constant growth rate of dividends. For example, if a company’s current dividend is $2 per share, the required rate of return is 10%, and the expected dividend growth rate is 5%, the tool would calculate the intrinsic value of the stock.

In finance and investing, understanding a company’s intrinsic worth is critical. This methodology offers a simplified approach to estimating the value of companies experiencing stable dividend growth. Developed by Myron J. Gordon, it remains a fundamental concept in equity valuation, especially for dividend-paying stocks. It provides a framework for long-term value assessment and can be a useful tool for comparing investment opportunities.

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