The constant dividend growth model is superior to the constant dividend model for valuing shares because it of its more realistic assumption regarding company dividend policies.

Question

Quizplus · Accepted Answer

The constant dividend model assumes a fixed dividend payout over time, which is often unrealistic as companies may change their dividend policies based on various factors such as earnings, cash flow, and market conditions. In contrast, the constant dividend growth model assumes a consistent growth rate in dividends over time, which is more realistic and takes into account the potential for a company's dividends to increase or decrease over time.

The Constant Dividend Growth Model Is Superior to the Constant