The three-stage dividend discount model is used to value growth companies and assumes that those experience three distinct stages—growth, transition, and maturity. It works best for firms with an initial high growth rate followed by a lower one during a transitional period, until they end up with a constant growth rate in perpetuity. The dividend discount model uses the principle that money today is more valuable than money tomorrow. So, it takes the expected value of the cash flows a firm will generate in the future and calculates its net present value (NPV).
This open-access Excel template is a useful tool for financial analysts, data analysts, and portfolio managers.
Three-Stage Dividend Discount Model is among the topics included in the Equity Investments module of the CFA Level 1 Curriculum. Gain valuable insights into the subject with our Fundamentals of Equity Valuation course.
You can also explore other related templates such as—Gordon Growth Model and Two-Stage Dividend Discount Model.
