Dividend Discount Model Calculator
The dividend discount model says a stock is worth the present value of its future dividends. In its simplest form, the Gordon growth model, value = next year's dividend ÷ (required return − growth). Pick a ticker to load its live dividend and price, choose the single-stage or two-stage model, and see the value per share, how it compares with the price, and the growth rate the market is already pricing in.
KO The Coca-Cola Company
$96.03 · $2.12/yr dividend · 2.21% yield · quarterly
Value per share (DDM)
$62.56
D1 $2.21 ÷ (8% − 4.46%)
Versus $96.03 price
-34.9%
Overvalued on this modelGrowth the price implies
5.67%
At r = 8%, forever
Return the price implies
6.77%
2.31% forward yield + 4.46% growth
How the value moves with your inputs
Value per share by discount rate (rows) and growth rate (columns). Blank where r is not above growth.
| r \ g | 3.5% | 4.0% | 4.5% | 5.0% | 5.5% |
|---|---|---|---|---|---|
| 7.0% | $61.96 | $72.50 | $87.19 | $109.08 | $145.18 |
| 7.5% | $54.29 | $62.26 | $72.85 | $87.60 | $109.60 |
| 8.0% | $48.31 | $54.55 | $62.56 | $73.20 | $88.02 |
| 8.5% | $43.52 | $48.55 | $54.82 | $62.86 | $73.54 |
| 9.0% | $39.59 | $43.73 | $48.78 | $55.08 | $63.16 |
Green: at or above today's $96.03 price. A half-point change in r or g often moves the value by 10% or more, which is why one model is never the whole answer.
Valuing on cash flow or earnings instead? Try the DCF calculator or the intrinsic value (Graham) calculator.
Worked example: The Coca-Cola Company (KO)
As of Nov 10, 2026, KO pays $2.12 a share a year and trades at $96.03. Its dividend grew about 4.5% a year over the past five years (we use 4.5% as the long-run rate), and our fair-value model uses a discount rate of 8.0% for it.
Gordon growth model: D1 = $2.12 × (1 + 4.46%) = $2.21. Value = $2.21 ÷ (8.00% − 4.46%) = $62.56 a share, 35% below the price, which reads as overvalued on this model.
What the price implies: at $96.03 and a required return of 8.0%, the market is pricing KO's dividend to grow 5.67% a year forever. Put the other way, buying at $96.03 with 4.5% growth implies an annual return of 6.77%(2.31% forward yield plus growth).
Two-stage model: 4.5% growth for 5 years, then 2.5% forever, at 8.0%, gives $43.05 a share (55% below the price). 78% of that value comes from dividends after year 5. Our weekly fair-value model, which adds a 5-year fade from stage-one growth down to 2.5%, puts KO's dividend discount value at $47.32 and its blended fair value (cash flow, dividends and earnings) at $53.67, 44% below today's price. See the KO valuation →
Dividend discount model formulas
Gordon growth: value = D1 ÷ (r − g), where D1 = D0 × (1 + g)
Two-stage: value = Σ D0(1 + g1)^t ÷ (1 + r)^t for t = 1…N, plus [D_N × (1 + g2) ÷ (r − g2)] ÷ (1 + r)^N
Implied growth (Gordon): g = (r × P − D0) ÷ (P + D0)
Implied return (Gordon): r = D1 ÷ P + g
D0 is the current annual dividend per share, r the required annual return, g the growth rate forever, g1 and g2 the stage-one and terminal growth rates, N the length of stage one and P the share price. Every formula needs r above the long-run growth rate; the calculator stops and tells you when it isn't.
KO Gordon value at different discount and growth rates
Value per share using KO's $2.12 dividend. Today's price is $96.03. Bold cells are at or above it.
| Discount rate | g = 2% | g = 3% | g = 4% | g = 5% | g = 6% |
|---|---|---|---|---|---|
| r = 7% | $43.25 | $54.59 | $73.49 | $111.30 | $224.72 |
| r = 8% | $36.04 | $43.67 | $55.12 | $74.20 | $112.36 |
| r = 9% | $30.89 | $36.39 | $44.10 | $55.65 | $74.91 |
| r = 10% | $27.03 | $31.19 | $36.75 | $44.52 | $56.18 |
One point of growth or discount rate changes the answer by a quarter or more. That is why the model works best as a sanity check on the price (what growth does it need?) rather than as a precise target.
Choosing the inputs
- Dividend (D0): the current annual rate, without special dividends. For a monthly payer, the monthly amount × 12.
- Required return (r): what you need to earn for the risk. Our fair-value model uses CAPM, 4.3% plus beta × 5%, kept between 8% and 12%.
- Growth forever (g): keep it at or below long-run economic growth, about 2% to 4%. A company's last five years are a guide, not a promise.
- Two-stage inputs: a higher stage-one rate for 5 to 10 years, then 2% to 3%. Our model caps stage-one dividend growth at 10% and uses 2.5% terminal growth.
Want this done for every dividend stock?
We blend a DDM, a discounted cash flow and an earnings multiple for thousands of payers each week, then flag the ones trading at least 15% below fair value.
Other ways to value a stock
- Value on free cash flow with the DCF calculator, which also uses a Gordon terminal value.
- Value on earnings with the intrinsic value calculator (Graham formula).
- Check the income side with the dividend yield calculator.
- Read how to value a dividend stock, or screen by fair value in the value screener.
Valuation facts
Data as of · Source: SmarterDividends data
- As of Nov 10, 2026, the median forward dividend yield among U.S.-listed dividend-paying stocks with a market value of at least $500 million is 2.50%.
- As of Nov 10, 2026, SmarterDividends tracks 3,069 U.S.-listed stocks, ETFs and funds that pay a dividend.
Cite this page
SmarterDividends, "Dividend Discount Model Calculator," updated Nov 10, 2026, https://smarterdividends.com/calculators/dividend-discount-model-calculator
Frequently asked questions
What is the dividend discount model?
The dividend discount model (DDM) values a stock as the present value of every dividend it will pay. Future dividends are discounted at your required return, because a dollar in ten years is worth less than a dollar today. If the value is above the share price, the stock looks cheap on this model; below it, expensive.
What is the Gordon growth model formula?
Value = D1 ÷ (r − g), where D1 is next year's dividend (this year's dividend × (1 + g)), r is your required return and g is the dividend growth rate forever. Example: a $2.00 dividend growing 5% gives D1 = $2.10. At a 9% required return the value is $2.10 ÷ (0.09 − 0.05) = $52.50 a share.
What discount rate should I use in a DDM?
Use the annual return you require for the risk. A common method is CAPM: a risk-free rate plus beta times an equity risk premium. Our fair-value model uses 4.3% + beta × 5%, held between 8% and 12%, so a stock with a beta of 1 gets 9.3% and a low-beta utility gets the 8% floor.
Why doesn't the model work when growth is higher than the discount rate?
The formula divides by r − g. When g equals r you divide by zero, and when g is bigger you get a negative value. Both mean the model assumes dividends grow faster than you discount them forever, which no company can do. Use a growth rate near long-run economic growth (2% to 4%), or a two-stage model for a fast grower.
What is a two-stage dividend discount model?
It splits the future into a high-growth period and a mature period. Dividends grow at a higher rate (say 8%) for N years, each one discounted back, and then a Gordon terminal value captures every dividend after that at a modest rate such as 2.5%. It suits companies whose dividend growth will slow as they mature.
What growth rate is the market pricing in?
Solve the Gordon formula for g given today's price: g = (r × P − D0) ÷ (P + D0). For a $52.50 stock paying $2.00 at a 9% required return, that is (4.725 − 2.00) ÷ 54.50 = 5.0%. If the implied rate looks easy for the company to beat, the stock may be cheap; if it looks hard, the price already assumes a lot.
Which stocks is the dividend discount model good for?
Mature companies that pay out a steady share of earnings and raise the dividend at a steady pace: consumer staples, utilities, telecoms, many REITs and large banks. It does not work for companies that pay no dividend, pay a token one, or return most of their cash through buybacks.
Is the dividend discount model accurate?
It is very sensitive to its inputs. For a $2.00 dividend at a 9% required return, moving long-run growth from 4% to 5% raises the value from $41.60 to $52.50, a 26% jump. Treat it as one view of value and cross-check with cash flow and earnings models.
For education and planning only, not investment, tax or legal advice. Projections assume constant growth rates; real dividends, prices and tax rules change.