How to Value a Dividend Stock! (Dividend Discount Model Example)

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  • Опубліковано 14 чер 2024
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    In this video, I go over step by step how to value a dividend stock using the dividend discount model. This is a method that has been used by many famous investors over the years, and has allowed investors to properly determine how to value dividend paying stocks.
    I am not a Financial advisor or licensed professional. Nothing I say or produce on UA-cam, or anywhere else, should be considered as advice. All content is for educational purposes only. I am not responsible for any financial losses or gains. Invest and trade at your own risk.
    Thanks for watching and don't forget to like and subscribe!
    The microphone I use: amzn.to/3ngqbVz
    The Intelligent Investor: amzn.to/3jWTWs9
    #Dividends #DividendDiscountModel #DividendStocks

КОМЕНТАРІ • 92

  • @reybigcena
    @reybigcena Рік тому +17

    Well, I said it once and I'll say it again, you are really good at explaining these formulas using real examples.
    Funny how you are the only guy on youtube that goes straight to the point in a simple and understandable way.

    • @Dividendology
      @Dividendology  Рік тому

      Thank you!! I always try and provide value!

  • @thearayshow5737
    @thearayshow5737 2 роки тому +1

    I watched this during my work break! This was amazing! Definitely hitting the sub button! Thanks for break in down the dividend discount model 💯

  • @LucyyyQ
    @LucyyyQ Рік тому

    Thank you so much! you solved the problem I have been stucked for a long time

  • @TheAnthonyWagner
    @TheAnthonyWagner Місяць тому

    What you did was so valuable.. Thanks Bro. I am subscribing

  • @xmarkfilms
    @xmarkfilms 2 роки тому

    Great tutorial, thank you sir

  • @renojames8
    @renojames8 2 роки тому +1

    Good video dude important stuff!

  • @poojakumari-tk5cp
    @poojakumari-tk5cp 2 роки тому +1

    Thank to explain in easy way

  • @samsonbouillon5107
    @samsonbouillon5107 Рік тому +1

    Hi, can't we just use the CAPM instead of the WACC to calculate the yield expected by the market ?

  • @piyushi8310
    @piyushi8310 Рік тому +3

    What does it mean when the result of difference is negative nmbr ?

  • @financewithjohnstanton2866
    @financewithjohnstanton2866 2 роки тому

    Love it!

  • @dunalar9454
    @dunalar9454 Рік тому

    I really like your channel and cannot wait seeing new guides, but Is there a way automate it when changing the ticker?

  • @jesterianestrada8008
    @jesterianestrada8008 Рік тому +3

    Man, sharing your knowledge feels like receiving dividends to my financial brain investment! hahaha. You make seemingly complicated stuffs so simple. You're an awesome teacher☺. I wish you can add some takeaways every end of your videos for scenarios where the method might not apply (such as if a negative output for this one). Also, if you can make for ETF valuation, but i think its always close to NAV? sorry, dummy brain here😅 Nevertheless, your tutorials are so helpful. Thank you so much. Keep making more (sounds demanding)hehehe.

    • @Dividendology
      @Dividendology  Рік тому +1

      Thank you!! I’ll try and continue to provide insight!

    • @farahz9552
      @farahz9552 Рік тому +1

      I have the same question regarding the negative output for this one!

  • @anthonykaroussos8915
    @anthonykaroussos8915 2 роки тому +3

    Can you possibly do a video covering how to calculate WACC? Using both the market value of equity and market value of debt?

    • @Dividendology
      @Dividendology  2 роки тому +3

      That’s a great idea! I’ll add that to my list of videos to make.

  • @laubena1454
    @laubena1454 2 місяці тому

    You should not use the WACC to discount the dividends of a company, you should use the Cost of Equity! Great video btw :)

  • @sanjivsharma366
    @sanjivsharma366 Рік тому +1

    Simply the Best!!

  • @skylerjohnson1455
    @skylerjohnson1455 2 роки тому +1

    Thanks!

  • @ciph3rwolf345
    @ciph3rwolf345 2 роки тому

    Cool stuff man. Do you recommend any books to dive deeper into this topic?

    • @Dividendology
      @Dividendology  2 роки тому

      Maybe not specifically on the topic of valuing dividend stocks, but I would recommend “The Intelligent Investor” by Benjamin Graham for any investor.

  • @hp4908
    @hp4908 Рік тому +5

    What if WACC minus Average dividend growth is negative? Will the formula still work or does it need an adjustment?

    • @colinferreira4503
      @colinferreira4503 Рік тому

      Have you found a solution to this yet? tried it with TGT and it didn't work

  • @afbarnes
    @afbarnes 6 місяців тому

    Is it valid to use WACC as WACC used both cost of equity and debt?

  • @altmile2346
    @altmile2346 2 роки тому +23

    Hi, for the dividend discount model, aren't we supposed to use the cost of equity insted of the WACC to find the intrinsic value?

    • @AA-fb6ni
      @AA-fb6ni Рік тому

      How do you work out the cost of equity?

    • @TheTitusification
      @TheTitusification Рік тому +1

      @@AA-fb6ni CAPM

    • @user-ys8dc2ni8z
      @user-ys8dc2ni8z Рік тому +3

      Of course you need cost of equity to value equity xd

    • @richullingfivefivefive1745
      @richullingfivefivefive1745 10 місяців тому

      Great video, but I agree, you should use CAPM to asses an adequate discount rate for equity only.

  • @DavidWilliams-cb9ez
    @DavidWilliams-cb9ez 2 роки тому

    Love your videos BTW! A comment/request and a question. When using DD Model do you or should you include a safety margin (say a 15 to 30%) reduction of calculated intrinsic value price? Most models include this but I've never seen this valuation model before so not sure what the norm is here. Next, I've seen your work and you are so capable of building a dynamic model that imports all the data via web scraping. To have a feature like this incorporated into a watch list where we see updated 'fair value" compared to current market price would be HUGE. That is a model I would pay for verses plugging away at Google Sheets and cussing like a sailor when I screw up the formula data. Great job. Subscribed and Liked!

    • @Dividendology
      @Dividendology  2 роки тому +3

      Hi David! I'm glad you like the videos! Applying a margin of safety to any valuation model is always a wise decision in my opinion regardless of which valuation model is used, although not all investors use a margin of safety.
      And that is a phenomenal idea for a spreadsheet. I really like this idea. I'm likely going to start looking into ways to make this possible. Give me some time and I'll see what I can do!

  • @user-ep8qe2hf7v
    @user-ep8qe2hf7v 6 місяців тому

    Hi, I want to know why use WACC but not cost of equity in this video?

  • @robertlaw8510
    @robertlaw8510 9 місяців тому

    It didn't work for me. I did it for SCHD and came up with a 2022 dividend total of 2.56 with an average growth rate of 15.53 and 6 for the WACC/Discount Rate gives me a negative intrinsic rate of -31.07. I'm sure that is happening because the average growth rate is less than greater than the discount rate. Does this not work on ETF"s?

  • @robertmanuelherrero
    @robertmanuelherrero 13 днів тому

    And what happens if the wacc is lower that the Average Growth rate?

  • @joaovitorsantiago4286
    @joaovitorsantiago4286 Рік тому +6

    What formula should I use when the average Growth Rate is higher than WACC? idk what to do

    • @zacharykeller9725
      @zacharykeller9725 Рік тому

      I wish I knew how to help you, but what stock are you looking at that their growth rate is higher than their WACC

    • @joshhays9148
      @joshhays9148 Рік тому

      I think a dividend discount model will be inappropriate for whatever you’re doing. I would recommend a DCF especially for tech stocks with high evaluations. Companies like Coke are far more mature (cough cough dividends) and investors attracted to the stock due to its steady growth rate and low volatility.

  • @relax238
    @relax238 Рік тому

    Can you explain how can the Div. discount model reliably tell us the intrinsic value of a stock? If a company doesn't pay dividends, than according to this formula the stock will have no value???? we are not counting in anything else of the company's earnings.

  • @ivanbosnjak9240
    @ivanbosnjak9240 Рік тому

    Why would you use WACC in dividend discount model, why not cost of equity?

  • @michaelabghari2392
    @michaelabghari2392 2 роки тому +2

    What do you do If the Average Growth Rate is bigger than WACC?

    • @Dividendology
      @Dividendology  2 роки тому +2

      This form of the model does not work prosperity if that is the case. There are other forms of the DDM that account for this, I’ll likely make a video on this in the future.

  • @michellegeronimo7591
    @michellegeronimo7591 2 роки тому

    Hi! can i still use DDM even if the growth rate is sometimes negative?

    • @Dividendology
      @Dividendology  2 роки тому +2

      When companies have a negative growth rate the DDM will not be a good valuation model. You will have skewed results.

  • @herr7979
    @herr7979 8 місяців тому

    Is it possible a negative number?

  • @ArturoGarzaID
    @ArturoGarzaID 10 місяців тому +1

    I'm getting an intrinsic value that's like a giant negative number. I'm working on AVGO.

    • @Dividendology
      @Dividendology  10 місяців тому

      if Dividend growth rate is higher than WACC/discount rate, that happens. There are other forms of the dividend discount model to account for this.

  • @dinozhang6368
    @dinozhang6368 2 роки тому

    Thanks bud! Would it be possible if the average growth rate is actually higher than WACC? If that's the case what do we have to do?

    • @Dividendology
      @Dividendology  2 роки тому +2

      It doesn’t happen often, but that is possible. There are other versions of the DDM that can be used in that scenario. I’ll likely make a video on that in the future!

    • @dinozhang6368
      @dinozhang6368 2 роки тому +1

      @Dividendology I did one on Apple and found that out

    • @AA-fb6ni
      @AA-fb6ni Рік тому

      @@dinozhang6368 Did you ever manage to find a solution to this? Thanks.

    • @AA-fb6ni
      @AA-fb6ni Рік тому

      @@Dividendology Could you direct me to this video please? Thanks

    • @fwayne1947
      @fwayne1947 Рік тому +1

      I just tried to use this model on McDonalds, and the dividend growth rate is higher than the WACC. How do we fix this problem?

  • @deeterfly
    @deeterfly Рік тому

    Im confused by the formula to get intrinsic value. The calculation you are using with those exact number is not coming out for me to what you are getting.

  • @user-xt8xg9ko4y
    @user-xt8xg9ko4y Рік тому

    What do you do if the dividend payout is different at different points in the year

  • @Tra2012
    @Tra2012 Рік тому

    Too good.

  • @jmatuuraj
    @jmatuuraj Рік тому +1

    What should I do if the average growth rate is higher than the WACC?

    • @jmatuuraj
      @jmatuuraj Рік тому

      like for MSFT - WACC = 8.19% and avg growth rate = 10%
      giving a negative value for the stock price

    • @Dividendology
      @Dividendology  Рік тому +1

      there are other forms of the DDM thta can account for this. I'll make a video on this soon.

  • @ignacioortega3102
    @ignacioortega3102 2 роки тому

    what does it mean the 10% difference? How can you know if a stock is over or undervalued, once you know the % difference. is 10% allot or is it little, thus this stock is not overvalued?

    • @Dividendology
      @Dividendology  2 роки тому +3

      It can really depend on the industry, and it also depends on your level of risk aversion as an investor. Many investors feel comfortable investing in a company if it’s undervalued by 10%, but some investors may only want to invest in companies that are undervalued by about 30 or even 40 percent.
      If the intrinsic value is greater than the stock price, then the stock is considered undervalued.

    • @ignacioortega3102
      @ignacioortega3102 2 роки тому +1

      @@Dividendology then for a company overvalued, the intrinsic value has to be lower than the stock price I imagine. Thank you for the help!

  • @xmarkfilms
    @xmarkfilms 2 роки тому

    what does it mean when the result of intrinsic value is negative number?

    • @Dividendology
      @Dividendology  2 роки тому

      That can happen when the average growth rate is higher than the weighted average cost of capital, which is one of the fallbacks of the dividend discount model. That is why the dividend discount model is typically used for blue chip dividend stocks.

    • @xmarkfilms
      @xmarkfilms 2 роки тому +1

      @@Dividendology noted on this, thank you

  • @binibibiii
    @binibibiii 2 роки тому

    Hi! May I know if this is a zero growth DDM?

    • @Dividendology
      @Dividendology  2 роки тому

      It assumes a constant growth rate!

    • @binibibiii
      @binibibiii 2 роки тому

      @@Dividendology thank you so much ❤️❤️❤️

  • @frederickportillo1394
    @frederickportillo1394 Рік тому

    Where do I find WACC with out having to do the math?

  • @nathanturner6021
    @nathanturner6021 11 місяців тому

    Do you need a safety margin for this model? I noticed that you did not use one.

    • @Dividendology
      @Dividendology  11 місяців тому

      I would suggest using a margin of safety with any valuation model.

  • @disloyalmari9163
    @disloyalmari9163 Рік тому

    ¿what happend if in 2020 and 2021 the company didnt pay dividends because the had loses?

    • @Dividendology
      @Dividendology  Рік тому

      Definitely take that into consideration. I would probably lower my growth rate projections because of this.

  • @user-tu4zb1fg9d
    @user-tu4zb1fg9d Рік тому +1

    If the Dividend Growth is higher than the WACC i get a negative figure

  • @priyakhurana8144
    @priyakhurana8144 Рік тому

    The working is not complete , where is the forecasting of the dividends and then discounting them to find the PV

    • @bboynava1812
      @bboynava1812 Рік тому +1

      The equation used is an abreviation of an infinite series if dividends that grow at a constant rate and are discounted at a constant rate.

  • @andyberger3310
    @andyberger3310 7 місяців тому

    its only working if average growth rate =< WACC, otherwise you get a negative value...

  • @chrisc5991
    @chrisc5991 Рік тому

    can i do 10 years worth of dividend data?

    • @Dividendology
      @Dividendology  Рік тому

      Use whatever helps you decide on a growth rate!

  • @Tay234.
    @Tay234. Рік тому

    “For beginners: If the ticker symbol isn’t “O” don’t invest”
    -Some other guy

  • @purudate4049
    @purudate4049 8 місяців тому

    Stop tutoring excel functionality in the midst of an all important topic on Dividend Discunt Model

  • @davidp252
    @davidp252 Рік тому

    I couldn't believe how you just glossed over the WACC and how to obtain those numbers. Makes the rest of the content unusable.

  • @sdflksdfngbf9793
    @sdflksdfngbf9793 Рік тому

    What if Average Growth Rate is higher than WACC?? Other people are also asking this question, but there hasn't been no answer

    • @Dividendology
      @Dividendology  Рік тому

      I’ll likely make a video on that sometime.