Share Price Growth Rate

Share Price Growth Rate

Share price growth is import ant element and share price is mainly depends on the expected growth rate of dividend. Share price growth rate can be calculated with the help of following equation.

Dividend Growth Rate = [Do/Dn] ^1/n- 1

Example of Growth Rate

Current Dividend	$ 6
Dividend 4 year back	$ 2

Calculate the Growth Rate?

Solution

Dividend Growth Rate = [Do/Dn] ^1/n- 1

= [6/2]^1/4-1

=1.31-1

=31%

This calculation can be used to calculate the share price using dividend valuation model. Dividend valuation model calculate the share price based on constant growth rate.