Financial Calculations & Valuation Beginner

Calculate Gordon Growth Dividend Discount Model (DDM) Intrinsic Value in Python

Compute stock intrinsic value using the single-stage and multi-stage Gordon Growth Dividend Discount Model (DDM) in Python.

#numpy

Problem Statement

Valuing stable, dividend-paying utility and banking stocks requires discounting expected future dividend payouts using the Gordon Growth Model.

Formula / Core Logic

Intrinsic_Value = D_1 / (Cost_of_Equity - Growth_Rate)

Installation

pip install numpy

dividend-discount-model-gordon-growth-python.py

def gordon_growth_ddm(current_dividend, cost_of_equity, growth_rate):
    if cost_of_equity <= growth_rate:
        raise ValueError('Cost of equity must exceed growth rate.')
    next_div = current_dividend * (1 + growth_rate)
    intrinsic_val = next_div / (cost_of_equity - growth_rate)
    return {'Next_Year_Dividend': round(next_div, 2), 'Intrinsic_Share_Price': round(intrinsic_val, 2)}