Post by Sameer Sheikh

365 Day Writing Challenge Day 324 Dividend Discount Model Overview A retired investor in Chennai built his entire portfolio around one question which BSE-listed companies will keep raising dividends reliably for the next twenty years. Dividend Discount Model values a stock based on the present value of all future dividends most applicable to mature, stable, dividend-paying Indian businesses with predictable cash generation. Coal India, ITC, and select PSU companies with consistent dividend histories made DDM analysis meaningful erratic or growth-reinvesting companies made the model theoretically sound but practically useless. The model's limitation surfaces immediately with Indian IT companies that generate enormous free cash flow but return capital through buybacks rather than dividends DDM dramatically undervalues them. Gordon Growth Model variant simplifies DDM to one formula dividend divided by the difference between required return and dividend growth rate elegant mathematics meeting messy Indian corporate reality. DDM works beautifully for the investor who wants income rather than appreciation it values the dividend stream honestly without promising anything about what the next excited buyer will pay tomorrow. #Finance #Investmentbanking #Linkedin