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Dividend Discount Model (DDM)

Difficulty: Intermediate

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.

USD $

 
Year Value DPSt or Terminal value (TVt) Calculation Present value at %
0 DPS01
1 DPS1 = × (1 + %)
2 DPS2 = × (1 + %)
3 DPS3 = × (1 + %)
4 DPS4 = × (1 + %)
5 DPS5 = × (1 + %)
5 Terminal value (TV5) = × (1 + %) ÷ (% – %)
Intrinsic value of Booking Holdings's common stock (per share) $
Current share price $

1 DPS0 = Sum of last year dividends per share of Booking Holdings'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.

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Required Rate of Return (r)

 
Assumptions
Rate of return on LT Treasury Composite1 RF %
Expected rate of return on market portfolio2 E(RM) %
Systematic risk (β) of Booking Holdings's common stock βBKNG
Required rate of return on Booking Holdings's common stock3 rBKNG %

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).

Calculations

2 See Details »

3 rBKNG = RF + βBKNG [E(RM) – RF]
= % + [% – %]
= %

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Dividend Growth Rate (g)

Company does not pay dividends

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