I'm trying to build a dividend discount model to be used in a pitch(I'm an intern). But, I was wondering if anyone knew where I could get my hands on a basic dividend discount model I could take a look at? I'm reading Damodaran's piece on valuing financial institutions, and it's been helpful. But I think taking a look at a real model will be able to guide me better. Thanks in advance.
By the way, happy thanksgiving everyone!
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Dividend discount is, mathematically and in terms of building it in excel, about the simplest there is (Assuming you mean a "true" dividend discount model of d/(r-g) or a related multi-stage dividend model and not a DCF model). Literally all you need to do is have those three items, though you will want some support for your choices. Is there a specific part that you're struggling with?
PM me.
Check Damodaran website: http://pages.stern.nyu.edu/~adamodar/
dividend discount model (Originally Posted: 06/11/2013)
Does anyone have a dividend discount model template they could send me? I will the trade some other models I have in exchange. Send me a PM if interested.
Dividend Discount Model - Growth Rates (Originally Posted: 11/17/2016)
If using the standard Gordon Growth model, what is the best 'value' to use as the growth rate?.
I was using the growth of the economy? which is slightly less than that needed to hit the growth rate needed for the current share price. Is this standard practice?.
With regards to multi-stage models, i notice the PRAT model is used for the initial High/Low growth period followed by the growth % needed for the share price using the Gordon Growth Model. This to me seems a bit strange?, again wouldn't it be more prudent to use the economy's growth as the share price?
Many Thanks for all the help
when I was a first year analyst I spent some time deriving an implied market based LTG rate for private company valuation... basically took the public comps, arrived at normalized DFCF multiple (inverse is cap rate), built up a WACC for guideline comps and applied some basic algebra to the Gordon growth model (Discount Rate - LTG Rate = Cap Rate) to arrive at a market based LTG rate ... it can be tough to determine"normalized" DFCF, but it worked pretty well for mature industries i.e. health systems.
I know you don't build in a lever for inflation for a DCF analaysis.
Do i have to build one in for a DDM analysis?
Two stage dividend discount model question (Originally Posted: 10/25/2009)
Am I correct in believing that the two stage dividend discount model only works where the initial growth rate is higher than the second growth rate i.e g1 > g2
bump?
Not necessarily...as long as g2 is less than r (discount rate) it works
Questions on DDM (Originally Posted: 07/08/2011)
Hi there,
1) Do big banks nowadays still use DDM model to value financial institutions?
2) When you build a DDM model, do you must use projected dividend per share? can you just use the total projected amount of dividend that the bank will give out each year?
It's a bit dry but I think this is pretty good insight on FIG valuation.
http://pages.stern.nyu.edu/~adamodar/pdfiles/papers/finfirm09.pdf
Calculating DDM with no dividends? (Originally Posted: 05/24/2013)
I'm writing an initiation report on a community bank, and one of my valuation methods is a DDM. Unfortunately, this bank does not pay out any dividends.
From what I have been able to find online, I can still use the DDM by finding the FCF and estimating the dividend pay-out ratio based on comparable firms. Is this a viable alternative?
If not, should I just disregard using a DDM and move on to my other valuation methods (RIM, P/TBV multiples)? Would love any and all advice. Thanks guys.
You should use an assumption (or compare to pears) to determine when they may begin issuing dividends and discount back. Or better yet, see a comparable firms payout ratio and "simulate" dividends based on this firms current retained earnings (if they have any).
Why not just discount the FCF to the firm at WACC, or the FCF to equity at the required return on equity?
Sounds good, I guess a two-stage growth FCFE model would probably be most appropriate. I do like the idea of simulating dividends as well, maybe I'll do both......
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