## Dividend Discount Model (DDM)

Intermediate level

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Dividends are the cleanest and most straightforward measure of cash flow because these are clearly cash flows that go directly to the investor.

### Intrinsic Stock Value (Valuation Summary)

**Booking Holdings Inc., dividends per share (DPS) forecast**

Stock valuation by this method is not possible because prior year DPS is equal to zero.

US$

Year | Value | DPS_{t} or Terminal value (TV_{t}) |
Calculation | Present value at 12.41% |
---|---|---|---|---|

0 | DPS_{0}^{1} |
0.00 | ||

1 | DPS_{1} |
— | = 0.00 × (1 + 0.00%) | — |

2 | DPS_{2} |
— | = — × (1 + 0.00%) | — |

3 | DPS_{3} |
— | = — × (1 + 0.00%) | — |

4 | DPS_{4} |
— | = — × (1 + 0.00%) | — |

5 | DPS_{5} |
— | = — × (1 + 0.00%) | — |

5 | Terminal value (TV_{5}) |
— | = — × (1 + 0.00%) ÷ (12.41% – 0.00%) | — |

Intrinsic value of Booking Holdings Inc.’s common stock (per share) | $— | |||

Current share price | $1,778.87 |

Based on: 10-K (filing date: 2020-02-26).

^{1} DPS_{0} = Sum of the last year dividends per share of Booking Holdings Inc.’s common stock. See details »

Disclaimer!

Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

### Required Rate of Return (*r*)

Assumptions | ||

Rate of return on LT Treasury Composite^{1} |
R_{F} |
1.27% |

Expected rate of return on market portfolio^{2} |
E(R)_{M} |
11.79% |

Systematic risk of Booking Holdings Inc.’s common stock | β_{BKNG} |
1.06 |

Required rate of return on Booking Holdings Inc.’s common stock^{3} |
r_{BKNG} |
12.41% |

^{1} Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

^{2} See details »

^{3} *r*_{BKNG} = *R _{F}* + β

_{BKNG}[

*E*(

*R*) –

_{M}*R*]

_{F}= 1.27% + 1.06 [11.79% – 1.27%]

= 12.41%

### Dividend Growth Rate (*g*)

Company does not pay dividends.