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Dividend Discount Model (DDM)

Trading Term

The Dividend Discount Model (DDM) is a valuation method used to estimate the intrinsic value of a stock based on the present value of its expected future dividend payments. The central premise of the DDM is that a stock is worth the sum of all future dividends it will pay to shareholders, discounted back to today’s value using a required rate of return. This model is grounded in the belief that dividends are the primary form of return to shareholders, particularly in mature, dividend-paying companies.

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