|
|
Dividend discount model |
|
|
|
 Home Site Map Add Term Search About Us Contributors |
Dividend discount modelA way of valuing a share based on the net present value of the dividends that you expect to receive in the future.The simplest version of the model assumes that the company's dividend rate remains constant. The 'fair' price of the share is the dividend (in pennies per share) divided by the required rate of return. So if you want 10% a year from your shares, the value of a company paying a 7p dividend is 70p. If you think a return of 8% is satisfactory, the value of the same share is 87.5p.A more complex model assumes that the dividends of the company grow at a consistent rate. The fair price to pay is the next dividend divided by the required rate of return minus the rate at which dividends are expected to grow. So if the 7p dividend is expected to grow at 5% per year, an investor requiring an 12% return would value the shares at (7p x 1.05) divided by (0.12 - 0.05)= (7.35p) divided by (0.07)= 105pSimilar MatchesIncome dividendIncome dividendIn the US, a distribution of interest or dividends to the shareholders of a mutual fund. Outstanding DividendsOutstanding DividendsDividend checks which have been mailed to shareholders of record but not yet cashed. Funds are held until the check is paid, reissued or escheated to the state as abandoned property. Preferred dividend coveragePreferred dividend coverageNet income after interest and taxes (before common stock dividends) divided by preferred stock dividends. Dividend OrderDividend OrderA letter or form signed by the shareholder instructing a corporation to issue and forward dividend and/or interest payments to a specific person or entity other than the registered owner, such as a bank or broker. Cum dividendCum dividendWhen a share is said to be 'cum dividend', it means that it is offered for sale with an entitlement to the next dividend payment attached. This dividend will already have been declared (but not paid) by the company, so the market knows how much it is worth and the share price will reflect this.At some point shortly before payment of the dividend is actually due, the share will go 'ex dividend', meaning that it is being offered for sale without the dividend. If the current owner sells an 'ex div' share, he will keep the dividend payment. But again, the price of the share will reflect this - it will have dropped from its 'cum dividend' price. Further SuggestionsSpecial dividendDividend Disbursing Agent Homemade dividend Ex dividend Ex stock dividends Participating dividend Liquidating dividend Equalizing dividend Dividend clawback Residual dividend approach Cum dividend Cumulative dividend feature unpaid dividend stock dividend Year end dividend Dividend clientele Dividend rollover plan Discounted dividend model (DDM) Dividend distribution Dividends payable Unpaid dividend Insurance dividend Dividend Dividends received deduction Dividend in arrears |
|
|
|