The dividend growth model can be used to value the stock of firms that pay which type of dividends?
I.Constant annual dividend
II.Annual dividend with a constant increasing rate of growth
III.Annual dividend with a constant decreasing rate of growth
IV.Zero dividend

Question

Quizplus · Accepted Answer

The dividend growth model is applicable to stocks with constant dividends, dividends growing at a constant rate, and dividends decreasing at a constant rate. It cannot be used for stocks that pay zero dividends.

The Dividend Growth Model Can Be Used to Value the Stock