Use the ymax dividend calculator (a variant of the Gordon Growth Model) to quickly determine the missing variable—be it Stock Price, Next Dividend, Required Return, or Constant Growth Rate—required for a specific dividend-paying stock investment.
ymax dividend calculator
The detailed calculation steps will appear here upon a successful computation.
ymax dividend calculator Formula:
P = D₁ / (R - G)
R = (D₁ / P) + G
G = R - (D₁ / P)
D₁ = P * (R - G)
Source: Investopedia – Gordon Growth Model, CFA Institute – Valuation
Variables:
- Next Expected Annual Dividend ($D_1$): The anticipated total dividend per share for the upcoming year. This is a dollar amount.
- Current Stock Price ($P$): The current market price of one share of the stock, used as the intrinsic value if calculating other factors.
- Required Rate of Return ($R$): The minimum return an investor demands for holding the stock, often related to the Cost of Equity (expressed as a percentage).
- Constant Dividend Growth Rate ($G$): The perpetual annual rate at which the dividend is expected to grow indefinitely (expressed as a percentage).
What is ymax dividend calculator?
The “ymax dividend calculator” is based on the Dividend Discount Model (DDM), specifically the Gordon Growth Model (GGM). It is a valuation method used by investors and analysts to estimate the fair price of a stock based on the theory that a stock’s intrinsic value is the present value of all its future dividends.
This tool is crucial for determining if a stock is trading at a fair price, or to calculate what growth rate or required return is implied by the current market price and dividend structure. By allowing you to solve for any one of the four key variables, it provides flexibility for various financial planning scenarios.
How to Calculate ymax dividend calculator (Example):
Suppose you know the Dividend ($D_1$), the Required Return ($R$), and the Growth Rate ($G$), but need to find the Present Value (Price, $P$).
- Identify Inputs: $D_1 = \$3.00$, $R = 12.0\%$ (or $0.12$), $G = 5.0\%$ (or $0.05$).
- Apply the Formula: First, calculate the denominator $(R – G)$. In this case, $0.12 – 0.05 = 0.07$.
- Calculate Price: Divide the Next Dividend by the result: $P = \$3.00 / 0.07$.
- Final Result: The fair value (Present Value) of the stock is approximately $\$42.86$.
Related Calculators:
- Dividend Yield Calculator
- Future Value of Annuity Calculator
- Capital Asset Pricing Model (CAPM) Calculator
- Net Present Value (NPV) Analysis Tool
Frequently Asked Questions (FAQ):
Is the Dividend Discount Model reliable?
The DDM is a simple and powerful tool, but its reliability depends heavily on the accuracy of the inputs, especially the constant growth rate ($G$), which is hard to predict far into the future. It works best for mature, stable, dividend-paying companies.
What happens if the Growth Rate ($G$) is higher than the Required Return ($R$)?
If $G \ge R$, the denominator $(R – G)$ will be zero or negative, resulting in an undefined or negative stock price. This scenario is mathematically impossible in the GGM context and indicates that the chosen inputs are unsustainable and invalid for the model.
What is the difference between $D_0$ and $D_1$?
$D_0$ is the dividend that was just paid (the current dividend). $D_1$ is the dividend expected to be paid next year. The formula uses $D_1$, which is often calculated as $D_0 \times (1 + G)$. This calculator simplifies by asking for $D_1$ directly.
When should I use the $R$ (Required Return) input?
You use the Required Return ($R$) when you want to calculate a fair Price ($P$) or an implied Growth Rate ($G$). It represents the return you want or need to achieve based on the riskiness of the investment.