There are three pieces needed to calculate the value of a stock using the dividends growth model. The current dividend payout and the growth rate of the dividend can be found online. However, the required rate of return must be greater than the growth rate of the dividend.
What happens if the growth rate in dividends is less than the required return?© BrainMass Inc. brainmass.com June 3, 2020, 11:24 pm ad1c9bdddf
When using the dividend growth model in computing for the value of a stock, the denominator which is the required rate of return less the dividend growth rate should be positive, ...
This solution goes through a scenario where dividends is less than the required return.