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# Qualcomm Inc. (QCOM)

## 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)

Qualcomm Inc., dividends per share (DPS) forecast

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 Qualcomm Inc.’s common stock (per share) \$
Current share price \$

Based on: 10-K (filing date: 2018-11-07).

1 DPS0 = Sum of last year dividends per share of Qualcomm 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 Expected rate of return on market portfolio2 E(RM) Systematic risk (β) of Qualcomm Inc.’s common stock βQCOM Required rate of return on Qualcomm Inc.’s common stock3 rQCOM

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

3 rQCOM = RF + βQCOM [E(RM) – RF]
= + []
=

### Dividend Growth Rate (g)

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

Qualcomm Inc., PRAT model

Average Sep 30, 2018 Sep 24, 2017 Sep 25, 2016 Sep 27, 2015 Sep 28, 2014 Sep 29, 2013
Selected Financial Data (USD \$ in millions)
Dividends
Net income (loss) attributable to Qualcomm
Revenues
Total assets
Total Qualcomm stockholders’ equity
Ratios
Retention rate1
Profit margin2
Asset turnover3
Financial leverage4
Averages
Retention rate
Profit margin
Asset turnover
Financial leverage
Dividend growth rate (g)5

Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).

2018 Calculations

1 Retention rate = (Net income (loss) attributable to Qualcomm – Dividends) ÷ Net income (loss) attributable to Qualcomm
= () ÷ =

2 Profit margin = 100 × Net income (loss) attributable to Qualcomm ÷ Revenues
= 100 × ÷ =

3 Asset turnover = Revenues ÷ Total assets
= ÷ =

4 Financial leverage = Total assets ÷ Total Qualcomm stockholders’ equity
= ÷ =

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= × × × =

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

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × (\$ × – \$) ÷ (\$ + \$) =

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

#### Dividend growth rate (g) forecast

Qualcomm Inc., H-model

Year Value gt
1 g1
2 g2
3 g3
4 g4
5 and thereafter g5

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)
= + () × (2 – 1) ÷ (5 – 1) =

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= + () × (3 – 1) ÷ (5 – 1) =

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= + () × (4 – 1) ÷ (5 – 1) =