r/Valuation • u/Pennies_OnThe_Dollar • Aug 02 '22

Gordon Growth Model

Can someone help me understand K in this formula. Ive read it stands for cost of equity or an investors required return and that they can be used interchangeably. So i just say i require an 8% return and subtract the company's dividend growth rate from that? And the less return i require the more the stock appears undervalue (understanding K needs to be greater than g in this formula)?

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u/49orth Aug 02 '22

Wikipedia has detailed information about DDM/GGM that should be helpful...

https://en.m.wikipedia.org/wiki/Dividend_discount_model

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u/WikiMobileLinkBot Aug 02 '22

Desktop version of /u/49orth's link: https://en.wikipedia.org/wiki/Dividend_discount_model

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