Dividend discount model
Value a share as the present value of all its future dividends — at one steady growth rate, or with a faster phase first — and see how far the price is from that value.
Runs entirely in your browserRuns entirely on your device — nothing you type is sent anywhere. Educational only, and not investment advice.
How to use this calculator
Each step names a control you will find on screen above.
- Next year’s dividend
The dividend per share you expect over the coming year (D₁). If you only know last year’s, multiply it by one plus the growth you expect.
- Required return
The annual return you demand for owning this share — its cost of equity. It must be higher than the long-run growth rate.
- Current price
Today’s share price, so the tool can show how far above or below the model value it trades.
- Years of faster growth and Growth in those years
An optional first stage in which the dividend grows faster. Set the years to zero for the pure Gordon growth model.
- Growth forever after
The permanent growth rate of the dividend. Keep it near long-run nominal GDP growth or below.
Worked example: A ₹10 dividend growing 12%, then 6%
A steady payer is expected to pay ₹10 a share next year, growing 12% a year for five years and 6% a year after that. You require 12% and the share trades at ₹180.
What to enter
- Next year’s dividend
- ₹10
- Required return
- 12%
- Current price
- ₹180
- Years of faster growth
- 5 yrs
- Growth in those years
- 12%
- Growth forever after
- 6%
What it shows you
- Value per share
- ₹202.38
- Current price
- ₹180.00
- Price vs value
- +12.4%
- Value from terminal
- 78%
Where this is taught
A calculator gives you a number. These explain what the number means and when it misleads you.
- Fundamental Analysis11 minThe dividend discount model: valuing a stock by its payoutsThe oldest valuation model there is: a share is worth the present value of every dividend it will ever pay. How the Gordon growth shortcut works, and why the answer is so sensitive to two inputs.
- Fundamental Analysis11 minCAPM: the price of risk, and your cost of equityEvery valuation needs a discount rate, and the cost of equity is where it starts. How the Capital Asset Pricing Model turns a stock’s risk into a required return, and how to use — and distrust — the answer.