Although the dividend discount model
suffers from many assumptions, and might not be the most useful model from a practical perspective, it still serves the purpose of the study.
Given these difficulties in estimating cash flows, we are often stuck with the dividend discount model
as a model of last resort.
Rewriting the dividend discount model
and using the observed market price, rather than intrinsic value, results in:
Generalized Markov dividend discount models
. Journal of Portfolio Management 24, no.
Applicability of the Dividend Discount Model
. While many analysts have abandoned the dividend discount model
, arguing that its focus on dividends is too narrow, the model does have its proponents.
Williams  dividend discount model
(DDM) provides the basis for most equity valuation models, where the value of the firm's equity, V, equals the present value of all expected future dividends, DIV, discounted at the firm's cost of equity capital, [r.sub.e], which is generally assumed constant through time:
NOI is similar to [D.sub.1] and the cap rate is similar to k - g in the dividend discount model
. To use this model, you need two estimates: projected NOI for the next period, and an estimate of the cap rate, which usually comes from comparable properties (those that are as similar as possible and that sold very recently).
(Other asset allocation services may use somewhat different maturities.) The proxy for stocks is a dividend discount model
that derives the expected return for the stock market from the stocks' estimated future dividend flow and from the current level of stock prices as reflected by the S&P 500.
The stock ranks in the top quintiles of our Dividend Discount Model
on both a global and regional basis.
As a consequence, it is termed a residual income model and can be derived from a simple dividend discount model
Within the FTSE Household Goods sector, Reckitt Benckiser looks expensive, as indicated by our Dividend Discount Model
Dividing both sides of the stable growth dividend discount model
by the book value of equity, we can estimate the price/book value ratio for a stable growth firm.