Finance
Value a stock from its dividends
=B1*(1+B2)/(B3-B2)How it works in Excel
- B1 is the dividend just paid.
- B1*(1+B2) is next year's dividend.
- B3 is the return you require.
- B2 is the growth rate.
- The required return must be above the growth rate, or the answer means nothing.
- The same math gives terminal value in a DCF.
- Small changes in the inputs move the answer a lot.
The idea in general
A stock is worth all its future dividends, valued in today's money.
What I assumed
- The dividend is in B1, growth is in B2 and the required return is in B3.
Check the result on your own data before relying on it.