Dividend valuation model - part 1
Taught by Ben Wilson · AI tutor support included
In this first part of the dividend valuation model series, you'll learn how to value a company using dividend payments—a technique that directly applies what you already know from the cost of capital section of your studies.
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In this lesson
- 0:00 Dividend valuation model for business valuation
- 0:31 Constant growth dividend valuation explained
- 0:52 Non-constant growth dividend calculations
- 1:11 Assessing model strengths and weaknesses
- 1:31 Cost of equity and dividend valuation link
- 2:21 Rearranging the formula for share price
- 3:17 Using CAPM with dividend valuation model
About this lesson
The video reconnects the dividend valuation model formula to the cost of equity, showing you how it's the same calculation simply rearranged to find share price instead. You'll explore how to handle both constant growth dividends (growing at a steady rate each year) and non-constant growth scenarios (where growth rates change over time), and understand why you need the Capital Asset Pricing Model (CAPM) to make this valuation method work. Finally, you'll discover the key strengths and weaknesses of the dividend valuation model so you can assess whether it's giving you a reasonable valuation in different business circumstances—essential knowledge for exam success and real-world application.
Duration: 4m
Transcript
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