Work out dividend discount model instantly with clear inputs, formula shown and shareable results.
The Gordon growth model values a share as next year's dividend divided by the gap between required return and dividend growth. The result is extremely sensitive to that gap, so the model suits stable, reliably dividend-paying businesses only.
Gordon growth model
P₀ = D₀(1+g) / (r - g)
Figures are estimates for planning only. Market returns are not guaranteed, and rates, limits and tax rules change. This is not financial or tax advice — speak to a qualified adviser before acting.
The formula breaks down. No company can grow faster than its cost of equity for ever, so use a multi-stage model.
The denominator is a small difference between two estimates, so a half-point change in either moves the value sharply.