Dividend Discount Model

Valuation model popularized by John Burr Williams in the 1930s, holding that the value of a share of common stock is equal to the present value of all of its future dividends. This model does apply to "growth" companies not yet paying dividends, but only theoretically. The preferred model today is that stock is worth the present value of its future earnings (or more accurately, of its future free cash flows).

See the valuation article or the interactive valuation graph.

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