Dividend Discount Model Calculator
Gordon Growth valuation from the dividend, its growth rate, and your required return.
Gordon Growth: next year’s dividend divided by the required return minus the growth rate. It suits stable, long-established payers and breaks down badly for anything that does not pay a dividend or whose growth is lumpy. The value is extremely sensitive to the spread between those two rates, so nudge the growth rate and watch what happens before trusting any single figure.
Worked example. A $2.00 dividend growing 5% a year, discounted at a 9% required return. Next year’s dividend is $2.10, and dividing by the 4-point spread gives an intrinsic value of $52.50. Notice the leverage in that spread: raise growth to 6% and the value jumps to $70.67, a 35% move from a one-point change.
Frequently asked questions
When does this model work?
For mature companies with a long, steady dividend history: utilities, consumer staples, established financials. It requires a dividend that plausibly grows at a constant rate forever, which is a strong assumption most companies cannot meet.
Why can growth not exceed the required return?
Because the formula sums an infinite series that only converges when growth is smaller. Economically, a company growing faster than its discount rate forever would eventually exceed the size of the economy. The model returns nothing there rather than a number.
What required return should I use?
Your cost of equity, which CAPM can supply, or simply the return you demand for the risk. Because value is so sensitive to the spread between it and growth, test a range rather than trusting one figure.
What about companies that do not pay dividends?
This model does not apply. Use a discounted cash flow instead, which values the cash the business generates regardless of whether it is distributed.
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Calculators model hypothetical outcomes from the inputs you provide. They are informational only, not financial, investment, tax, or legal advice.