The dividend growth model has a limitation due to the necessity to have a non-growing dividend pattern in order for it to work.

Question

Quizplus · Accepted Answer

The dividend growth model actually requires an assumption of a constant growth rate in dividends per share, not a non-growing dividend pattern. It is designed to value stocks based on the assumption that dividends will grow at a constant rate indefinitely.

The Dividend Growth Model Has a Limitation Due to the Necessity