The Dividend Discount Model or DDM is a common method for valuing a dividend-paying stock. The basic premise is that the value of a dividend-paying stock is the sum of all future expected dividends discounted to their present value (due to the time value of money, ie. a dollar today is worth more than a dollar tomorrow, even after inflation).

The DDM is best applied to established companies at the mature stage of the business cycle. The DDM is commonly used, along with other valuation methodologies, to value companies within the utilities, health care, financials and consumer staples sectors. This web site is under construciton, but you can read more about the DDM online or watch the video below.

Note: This is general information only and should not be construed as advice.