Gordon Growth Model | Institute of Investing

Gordon Growth Model (DDM)

Note: JavaScript is disabled. Formula:
Intrinsic Value = [D0 * (1 + g)] / (k - g)
Where D0 = Current Dividend, g = Growth Rate, k = Required Return

Intrinsic Value per Share $0.00

Methodology

The Gordon Growth Model (a variant of the Dividend Discount Model) values a stock by assuming dividends grow at a constant rate in perpetuity.

This model is highly sensitive to the inputs. If the growth rate exceeds the required rate of return, the model breaks mathematically (yielding a negative value), which makes intuitive sense: a company cannot grow faster than its cost of capital forever.

It is best used for mature, dividend-paying companies (e.g., Utilities, REITs, established consumer staples).