Constant Dividend Share Valuation Formula

Constant Dividend Share Valuation Formula

Constant Dividend means that there is no growth in the dividend. It means company is same dividend

Year 1       10

Year 2       10

Year 3       10

In case of dividend, share price can be valued by following formula

Share Price =            Constant Dividend

                                 Cost of Equity

Example

Dividend is 20 cent

20 year Dividend Expectation = 20 Cent

Cost of equity = 12%

Solution

Share Price = Constant Dividend           

                        Cost of Equity

Share Price = .2

                    .12

Share price = 1.667