Valuation of Stocks with Prospects of Dividend Growth

Abstract

The exhibits support several conclusions we can draw from use of the Williams and Brigham-Pappas dividend growth models. The particular model selected to describe a stock's dividend time path has a great impact on the stock's identified value. This may be seen in the large differences in stock values for the same cells in Exhibits 3, 4, and 7. The dividend growth pattern should be carefully estimated and the appropriate model applied.The particular dividend growth rate applied has a great impact on the stock's identified value. This may be seen in the large differences in stock values shown in Exhibits 5, 6, and 8. The expected growth rate should be carefully estimated and tested for its reasonableness.The particular required rate of return applied also has a great impact on the stock's identified value. This may be seen in the large differences in values in Exhibits 3, 4, and 7. The risk characteristics of the stock should be carefully estimated.The particular stock price applied also has a great impact on the stock's identified rate of return. This may be seen in the differences in rates of return in Exhibits 3, 4, and 7. The return implications of the stock's price should be carefully considered.And, finally, the particular stock price applied has a great impact on the stock's identified dividend growth rate. This may be seen in the differences in dividend growth in Exhibits 2, 5, and 6. The growth implications of the stock's price should be carefully evaluated for reasonableness.