Equity

Dividend Discount Model (DDM)

Definition

A stock valuation method that estimates the present value of a company's expected future dividends. Assumes that a stock's value equals the sum of all future dividends discounted to the present.

Formula / Rules
P = D1 / (r − g) [Gordon Growth Model version]
Example
The DDM is widely used for stable, dividend-paying companies like utilities and consumer staples.
Related Terms
Capital Asset Pricing Model (CAPM) Dividend Dividend Yield
Frequently Asked Question
What is the Dividend Discount Model (DDM)?
The DDM values a stock as the present value of all expected future dividends. The Gordon Growth Model is a simplified version assuming constant dividend growth: P = D1 / (r − g).
APA Citation
Clark, R. (2025). Dividend Discount Model (DDM). VixShield Trading Glossary. Retrieved from https://www.vixshield.com/glossary/dividend-discount-model
RC
Russell Clark, FNP-C
Author of SPX Mastery series · Founder of VixShield
Last updated:  ·  Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.