The dividend growth model can be used to value the stock of firms which 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 (I), dividends growing at a constant rate (II), and dividends decreasing at a constant rate (III). It cannot be used for zero dividends (IV).

The Dividend Growth Model Can Be Used to Value the Stock