We cover how to create a Dividend Discount Model (DDM) to value a stock in Excel. The DDM is a present value model for valuing a stock which is based on the dividends paid by a company. Since dividends are less volatile than earnings, this may make the DDM less sensitive to short run fluctuations in the inputs than other models. Generally, this model is most suitable when a company is dividend paying and the company’s dividend policy is related to the company’s profitability. Therefore, it is typically better suited to mature companies as they tend to display these characteristics. All else equal, a company with higher dividends should be associated with higher valuations.

DISCLAIMER: Although I have taken great care to check all of the calculations, I am not a qualified financial advisor or accountant and you should not use this video to substitute financial advice. Make sure you talk to your own advisor before you use this model to make any financial decisions. Please do not rely solely on this model to guide your investment decisions.

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Overview: (0:00)
Assumptions: (1:02)
Creating the Dividend Discount Model: (1:53)
Implied Share Price: (4:28)