Definition for : Dividend discount model, DDM

The Dividend discount model is based on the assumption that the Value of a company is determined by the stream of Dividends the investor expects to receive over a period of time. This model is one of the fundamental valuation methods. The Dividends are discounted at the Cost of equity. The DDM model gives the intrinsic Value (called intrinsic Value – Share) of the company.

(See Chapters Chapter 19 The required rate of return, Chapter 32 Capital structure and the theory of perfect capital markets and Chapter 38 Share issues of the Vernimmen)

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