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Three-Stage Dividend Discount Model
Three-Stage Dividend Discount Model
This model is designed to value the equity in a firm with three stages of
growth - an initial period of high growth, a transition period of declining
growth and a final period of stable growth.
Assumptions
3. The growth rate declines linearly over the transition period to a stable growth rate.
4. The firm's dividend payout ratio changes consistently with the growth rate.
Page 1
Three-Stage Dividend Discount Model
Do you want to use the historical growth rate? Yes (Yes or No)
If yes, enter EPS from five years ago = $58.20 (in currency)
Do you want to calculate the growth rate from fundamentals? No (Yes or No)
If yes, specify the values for these inputs (Please enter all variables)
ROE = NA (in percent)
Retention = -47.91% (in percent)
Page 2
Three-Stage Dividend Discount Model
Do you want to change any of these inputs for the stable growth period? Yes (Yes or No)
(in percent)
Page 3
Three-Stage Dividend Discount Model
Do you want the payout ratio to adjust gradually to stable payout? Yes (Yes or No)
If no, enter the payout ratio for the transition period = (in percent)
Do you want the beta to adjust gradually to stable beta? Yes (Yes or No)
Page 4
Three-Stage Dividend Discount Model
Page 5
Three-Stage Dividend Discount Model
The dividends for the high growth phase are shown below (upto 10 years)
Year 1 2 3 4 5
Earnings $64.61 $65.00 $65.39 $65.78 $66.18
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Three-Stage Dividend Discount Model
MODEL
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Three-Stage Dividend Discount Model
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Three-Stage Dividend Discount Model
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Three-Stage Dividend Discount Model
12 13
$88.75 $95.86
$63.01 $57.51
0.244 0.244
4.72% 4.72% 0.00% 0.00%
$36.23 $31.58
Page 10
Three-Stage Dividend Discount Model
This model is designed to value the equity in a firm with three stages of
growth - an initial period of high growth, a transition period of declining
growth and a final period of stable growth.
Assumptions
3. The growth rate declines linearly over the transition period to a stable growth rate.
4. The firm's dividend payout ratio changes consistently with the growth rate.
Page 11
Three-Stage Dividend Discount Model
Do you want to use the historical growth rate? Yes (Yes or No)
If yes, enter EPS from five years ago = $13.65 (in currency)
Do you want to calculate the growth rate from fundamentals? No (Yes or No)
If yes, specify the values for these inputs (Please enter all variables)
ROE = NA (in percent)
Retention = 76.17% (in percent)
Page 12
Three-Stage Dividend Discount Model
Do you want to change any of these inputs for the stable growth period? Yes (Yes or No)
(in percent)
Page 13
Three-Stage Dividend Discount Model
Do you want the payout ratio to adjust gradually to stable payout? Yes (Yes or No)
If no, enter the payout ratio for the transition period = (in percent)
Do you want the beta to adjust gradually to stable beta? Yes (Yes or No)
Page 14
Three-Stage Dividend Discount Model
Page 15
Three-Stage Dividend Discount Model
The dividends for the high growth phase are shown below (upto 10 years)
Year 1 2 3 4 5
Earnings $16.63 $16.78 $16.93 $17.07 $17.22
Page 16
Three-Stage Dividend Discount Model
MODEL
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Three-Stage Dividend Discount Model
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Three-Stage Dividend Discount Model
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Three-Stage Dividend Discount Model
12 13
$23.32 $25.18
$12.94 $15.11
0.66 0.66
6.32% 6.32% 0.00% 0.00%
$6.20 $6.81
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