Dividend Discount Return

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The rate of return which equates the present value of future expected dividends with the current market price of a security.

Dividend Discount Return

The projected return on a stock that is calculated by estimating the present value of future dividends. One compares the dividend discount return to the current stock price, and if the former is higher, this indicates that the stock is undervalued. There are various ways to calculate the dividend discount return, but it is important to note that they all assume that the stock will in fact pay dividends, which may not always be the case.

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