Dividend Discount Model Calculator: Gordon Growth

Dividend Discount Model Calculator

Estimate a share’s value with the constant-growth Dividend Discount Model (Gordon Growth Model). Enter the most recent annual dividend per share, expected annual dividend growth and required annual return.



Calculating the example…


Dividend Discount Model formula

This calculator uses the one-stage constant-growth model, also called the Gordon Growth Model:

Estimated value per share = D₁ ÷ (r − g), where D₁ = D₀ × (1 + g).

  • D₀ is the most recent annual dividend per share.
  • D₁ is the expected dividend over the next year.
  • r is the required annual return, and g is the expected annual dividend growth rate.

The model requires r > g. When a current price is entered, the calculator also reports (estimated value ÷ current price − 1) × 100 as model-implied upside or downside.

Worked example

If D₀ is $2.00, expected annual growth is 5%, and required return is 9%, then D₁ = $2.00 × 1.05 = $2.10. The spread r − g is 0.09 − 0.05 = 0.04, so the estimated value is $2.10 ÷ 0.04 = $52.50 per share. At a current price of $48.00, the model-implied difference is ($52.50 ÷ $48.00 − 1) × 100 = 9.375%.

How to use it

  1. Enter the latest annual dividend per share, not the next dividend (the calculator projects D₁ from D₀).
  2. Enter annual growth and required-return assumptions as percentages. They must refer to the same currency, dividend basis and annual period.
  3. Optionally add a current share price to compare it with the model estimate. Leave blank to calculate value only.

Limits and assumptions

  • This is a single-stage model that assumes dividends grow at one constant rate indefinitely. It is not suitable for companies with no dividend, unstable distributions or growth expected to change materially; consider a multi-stage valuation model in those cases.
  • Expected growth must be greater than −99.99% and no higher than 100% per year; required return must be 0% to 100% and strictly greater than growth.
  • Dividend and share price must be positive and use the same currency and per-share basis. The calculator does not convert currencies, forecast taxes or fees, or predict future prices.
  • A value estimate is sensitive to small changes in r − g. It is an educational scenario, not investment advice, a forecast or a guarantee of market performance.

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