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Miraç Özdemir
Business Valuation & Corporate Finance

Gordon Growth Model Calculator (Dividend Discount Model)

Calculates the intrinsic value of a share with the Gordon growth model from the last dividend, a constant growth rate and the required return, plus the dividend yield and implied return at the market price.

Version 2

Things to keep in mind:

  • The model assumes dividends grow at a constant rate forever; small changes in the growth rate change the value considerably.
  • It is not suitable for companies that pay no or irregular dividends; use the DCF method instead.
  • Dividend withholding tax and personal taxes are not modelled.
  • The result is not a buy/sell recommendation or investment advice.

Calculator

Dividend and return

TRY

Gross dividend per share paid over the last 12 months.

Long-run constant annual dividend growth; negative for a decline.

Cost of equity; must be above the growth rate.

Market comparison

TRY

Share price for comparison (optional).

After the first calculation, the result updates automatically when you change a value.

Result

Enter the values and press Calculate to see the result here.

About this tool

The Gordon growth model is the constant-growth form of the dividend discount model (DDM). It values a share as the present value of dividends assumed to grow at a constant rate forever. It suits mature companies with regular dividends (banks, energy and infrastructure companies, for example).

Formulas

  • Next year's dividend D₁ = Last dividend D₀ × (1 + g)
  • Intrinsic value P₀ = D₁ / (k − g), with k = required return (cost of equity) and g = dividend growth rate
  • Dividend yield at the market price = D₁ / Price
  • Implied return = D₁ / Price + g (the expected return the market price offers)

Example: with a last dividend of 2 TRY per share, expected dividend growth of 5% a year and a required return of 15%, D₁ = 2.10 TRY and intrinsic value is 2.10 / (0.15 − 0.05) = 21 TRY. If the share trades at 20 TRY, the dividend yield is 10.5% and the implied return 15.5%; the model value is 5% above the price.

The model is defined only when k > g. You can derive the required return with the CAPM tool. In a high-inflation TRY setting, enter both k and g in nominal terms with the same inflation assumption.

How to use

  1. Enter the last (annual) gross dividend per share.
  2. Enter the annual growth rate you expect the dividend to sustain in the long run.
  3. Enter the required return (cost of equity); the CAPM tool can calculate it.
  4. Optionally enter the current market price, then press Calculate.

Notes

Dividends are rounded to 4 decimals, value to the cent and ratios to 2 decimals (HALF_UP). If the required return is not above the growth rate, the model is undefined and intrinsic value shows 0. Dividend withholding and other taxes are ignored; the calculation uses gross dividends. Without a market price the price-based ratios show 0.

Sources

Frequently asked questions

4 questions

  1. P₀ = D₁ / (k − g), where D₁ is next year's expected dividend, k the return investors require and g the constant dividend growth rate.

Next step

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