The dividend growth model:
A) is only as reliable as the estimated rate of growth.
B) can only be used if historical dividend information is available.
C) considers the risk that future dividends may vary from their estimated values.
D) applies only when a company is currently paying dividends.
E) is based solely on historical dividend information.

Question

Quizplus · Accepted Answer

The dividend growth model relies heavily on the estimated rate of growth, which can be a difficult prediction to make and is subject to change over time. Therefore, it is only as reliable as this estimated rate.

The Dividend Growth Model