Dividend
Growth Rate Examples
Dividend growth rate is very important
element of dividend valuation model and without constant growth rate we cannot
value share price under dividend valuation model. Dividend valuation model is
based on assumption that dividend will grow with a constant rate.
Share Growth Rate = [Do/Dn]1/n-1
Do=
Current Dividend
Dn
= Previous year Divided
n
= previous years (when dividend was paid last time)
Dividend Growth
Rate Example Single period
ABC
Company announced dividend $ 6 for the current period. Dividend announced last
year was $ 4. What is Dividend growth rate?
=
[ 6/4]1/1-1 x 100
=
50%
Dividend Growth
Rate Example multiple periods
ABC
Company declared dividend $ 6 for the current period. Dividend declared 3 years
ago was $ 4. What is Dividend growth rate?
=
[ 6/4]1/3-1 x 100
=
14.4 %
Dividend Growth
Rate Example (5 Years)
XYZ
has paid dividend in current year $ 6; dividend paid 5 year back was $ 4.
Calculate the dividend growth for XYZ?
=
[6/4]1/5-1 x 100
=
8.44 %
