What is a dividend valve model?

The dividend valve model is a mathematical formula that uses the potential value of the company to determine the price of shares through dividend. It is a common tool of brokers trying to predict the future value of the stock. This method is considering all available shares information so that the actual future value is closer to the actual future value and is often accurate enough to be a useful tool of decision -making. It is one of the types of dividend discount models and is also known as the Gordon model.

Dividend valve models are only effective for companies that distribute dividends. Using the Dividend Valuation model, dividends are expected to grow at constant speed. In order to use the equation to determine the current stock price, the dividend of the current period is usually multiplied by one plus the speed of growth. It is then divided by the required return rate minus growth rate.

Specific numbers used with the dividend valve model may vary in z ZThe facts such as the size of society and the expected growth. On the other hand, the growth of earnings is usually expected to be constant. This is mainly because if the growth rate is very high, it will usually be able to keep this level for a short time. If the growth rate is high for a while, it usually decreases to what is known as a sustainable rate.

There are several characteristics of the dividend valve model that can complicate its use. It does not tend to work well with supplies that have a highly variable growth speed. The model is also less useful for companies that decide to reduce the level of dividends, rather than the standard procedure for maintaining a fair level or slightly increase them. It does not tend to function well with companies that do not temporarily offer dividends.

Dividend discount model is the overall model from which the dividend valve model is equallye developed. It generates a future dividend, which can then be discounted to determine the current value. This means that the equation determines the pure current value by anticipating the future value and deducting the expected growth. The equation finds the value of the shares by dividend dividend at the discount rate, minus the growth rate of dividends. As with the dividends themselves, this model tends to maintain value levels constant than the stock market.