dividend discount model

Dividend Discount Model (DDM)

A method to value the common stock of a company that is based on the present value of the expected future dividends.

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dividend discount model

A model used to determine the price at which a security should sell based on the discounted value of estimated future dividend payments. Dividend discount models are used to determine if a security is a good buy, such as one that sells at a lower current price than the model would indicate, or a bad buy, such as one that sells at a higher current price than the model would indicate.