Dividend Discount Model Calculator

Estimate single-stage Gordon-growth intrinsic value from next-year dividend, required return, perpetual growth, and optional current market price comparison.

Result

$48.00

Gordon-growth intrinsic value estimate from a next-year dividend of $2.40 and a required-return spread of 5%.

Required return
9%
Perpetual growth
4%
Spread
5%
Valuation gap
$10.00

Against the current market price

The model implies 26.32% upside versus the entered current market price of $38.00.

Display currency

Switch the output currency formatting used for dividend, intrinsic value, and any market-price comparison.

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Investing Basics

Dividend discount model calculator guide: single-stage Gordon growth intrinsic value

A dividend discount model calculator estimates the intrinsic value of one dividend-paying stock by discounting a stable stream of future dividends. This version uses the single-stage Gordon growth model, which means it assumes dividends grow at a constant perpetual rate and that the required return is higher than that growth rate.

What this DDM calculator is measuring

The Gordon growth dividend discount model estimates what one share may be worth today if the next-year dividend is known, dividends are expected to grow at a stable perpetual rate, and investors require a specific return to hold the stock. In that narrow setting, value is the present value of a growing perpetuity.

This is a deliberately narrow model. It is best suited to mature dividend-paying businesses with relatively stable payout policies. It is not designed for companies with no dividends, unstable dividends, multi-stage growth, or heavy dependence on buybacks rather than cash dividends.

The core formula

The single-stage Gordon growth model values the stock by dividing the expected next dividend by the difference between the required return and the perpetual growth rate. That spread is the critical assumption. Small changes in the spread can move the valuation sharply.

This is why the model only works when the required return is greater than the growth rate. If growth is equal to or above the discount rate, the stable-growth formula breaks down and the result stops being meaningful.

Intrinsic value = Next dividend per share / (Required return - Growth rate)

The standard Gordon growth DDM relationship, using rates as decimals.

Valuation gap = Intrinsic value - Current market price

Optional comparison showing how far the model estimate sits above or below the entered market price.

Worked example: 2.40 next dividend, 9% required return, 4% growth

If the expected next-year dividend is 2.40, the required return is 9%, and the perpetual growth rate is 4%, the spread is 5%. Dividing 2.40 by 0.05 gives an intrinsic value estimate of 48 per share.

If the current market price is 38, the same setup implies a positive valuation gap of 10 and an upside estimate of roughly 26.3%. That comparison can be useful, but the output is only as credible as the dividend, growth, and required-return assumptions behind it.

Where a single-stage DDM can mislead

This model is highly assumption-sensitive. A one-point change in the required return or growth rate can shift the valuation materially, especially when the spread is already narrow. The result should therefore be treated as a scenario estimate, not a precise fair value.

It also excludes special dividends, irregular payout policies, multi-stage growth, buybacks, and changes in capital structure. Those limitations are why DDM works best as a transparent educational model for stable dividend payers rather than a universal stock-valuation tool.

Further reading

Frequently asked questions

When is the dividend discount model most appropriate?

It is most appropriate for stable dividend-paying companies where a constant-growth assumption is at least defensible. It is much less suitable for firms with no dividends, irregular payouts, or multi-stage growth profiles.

 Why must required return be greater than growth?

Because the Gordon growth formula divides by the spread between required return and growth. If the required return is equal to or lower than growth, the stable-growth valuation relationship breaks down.

 Does this calculator handle multi-stage dividend growth?

No. This version is intentionally limited to the single-stage Gordon growth model. More complex payout patterns need a multi-stage model and separate assumptions.

 Is the DDM output a fair-value verdict?

No. It is an educational scenario estimate driven by your assumptions about dividends, growth, and required return. Small assumption changes can produce large valuation changes.

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