The dividend discount model (DDM)cannot be used to value the stock of a company that has never paid a dividend and does not expect to pay a dividend in the near term.

Question

Quizplus · Accepted Answer

The dividend discount model (DDM) can be adapted to value a company that does not currently pay dividends by making assumptions about the company's ability to generate and pay dividends in the future or by using a variant of the model that focuses on free cash flow to the firm or equity.

The Dividend Discount Model (DDM)cannot Be Used to Value the Stock