# Mondelēz International Inc. (NASDAQ:MDLZ)

## 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)

Mondelēz International Inc., dividends per share (DPS) forecast

US\$

Year Value DPSt or Terminal value (TVt) Calculation Present value at 9.37%
0 DPS01 1.09
1 DPS1 1.18 = 1.09 × (1 + 8.33%) 1.08
2 DPS2 1.28 = 1.18 × (1 + 8.07%) 1.07
3 DPS3 1.38 = 1.28 × (1 + 7.80%) 1.05
4 DPS4 1.48 = 1.38 × (1 + 7.54%) 1.03
5 DPS5 1.59 = 1.48 × (1 + 7.28%) 1.01
5 Terminal value (TV5) 81.32 = 1.59 × (1 + 7.28%) ÷ (9.37%7.28%) 51.96
Intrinsic value of Mondelēz International Inc.’s common stock (per share) \$57.20
Current share price \$55.85

Based on: 10-K (filing date: 2020-02-07).

1 DPS0 = Sum of the last year dividends per share of Mondelēz International 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 Composite1 RF 1.25% Expected rate of return on market portfolio2 E(RM) 12.09% Systematic risk of Mondelēz International Inc.’s common stock βMDLZ 0.75 Required rate of return on Mondelēz International Inc.’s common stock3 rMDLZ 9.37%

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).

3 rMDLZ = RF + βMDLZ [E(RM) – RF]
= 1.25% + 0.75 [12.09%1.25%]
= 9.37%

### Dividend Growth Rate (g)

#### Dividend growth rate (g) implied by PRAT model

Mondelēz International Inc., PRAT model

Average Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Selected Financial Data (US\$ in millions)
Cash dividends declared 1,576  1,409  1,239  1,116  1,026
Net earnings attributable to Mondelēz International 3,870  3,381  2,922  1,659  7,267
Net revenues 25,868  25,938  25,896  25,923  29,636
Total assets 64,549  62,729  63,109  61,538  62,843
Total Mondelēz International shareholders’ equity 27,275  25,637  26,111  25,161  28,012
Financial Ratios
Retention rate1 0.59 0.58 0.58 0.33 0.86
Profit margin2 14.96% 13.03% 11.28% 6.40% 24.52%
Asset turnover3 0.40 0.41 0.41 0.42 0.47
Financial leverage4 2.37 2.45 2.42 2.45 2.24
Averages
Retention rate 0.59
Profit margin 14.04%
Asset turnover 0.42
Financial leverage 2.38

Dividend growth rate (g)5 8.33%

Based on: 10-K (filing date: 2020-02-07), 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-24), 10-K (filing date: 2016-02-19).

2019 Calculations

1 Retention rate = (Net earnings attributable to Mondelēz International – Cash dividends declared) ÷ Net earnings attributable to Mondelēz International
= (3,8701,576) ÷ 3,870 = 0.59

2 Profit margin = 100 × Net earnings attributable to Mondelēz International ÷ Net revenues
= 100 × 3,870 ÷ 25,868 = 14.96%

3 Asset turnover = Net revenues ÷ Total assets
= 25,868 ÷ 64,549 = 0.40

4 Financial leverage = Total assets ÷ Total Mondelēz International shareholders’ equity
= 64,549 ÷ 27,275 = 2.37

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.59 × 14.04% × 0.42 × 2.38 = 8.33%

#### Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × (\$55.85 × 9.37%\$1.09) ÷ (\$55.85 + \$1.09) = 7.28%

where:
P0 = current price of share of Mondelēz International Inc.’s common stock
D0 = the last year dividends per share of Mondelēz International Inc.’s common stock
r = required rate of return on Mondelēz International Inc.’s common stock

#### Dividend growth rate (g) forecast

Mondelēz International Inc., H-model

Year Value gt
1 g1 8.33%
2 g2 8.07%
3 g3 7.80%
4 g4 7.54%
5 and thereafter g5 7.28%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= 8.33% + (7.28%8.33%) × (2 – 1) ÷ (5 – 1) = 8.07%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= 8.33% + (7.28%8.33%) × (3 – 1) ÷ (5 – 1) = 7.80%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= 8.33% + (7.28%8.33%) × (4 – 1) ÷ (5 – 1) = 7.54%