Dividend capitalization model

Dividend capitalization model,

Definition of Dividend capitalization model:

  1. Method for estimating a firms cost of common (ordinary) equity. This approach approximates a future dividend stream based on the firms dividend history and an assumed growth rate, and computes the market capitalization rate that equates it with the current market price. In the case of closely-held firms (such as sole proprietorships and partnerships) which do usually not distribute profits as dividends, the firms dividend paying capacity is estimated from its average net income and average cash flow and compared with the dividends actually paid by a similar size firm. Also called dividend growth model. See also capital asset pricing model (CAPM).

Meaning of Dividend capitalization model & Dividend capitalization model Definition