Gordon Growth Model
Valuation formula holding that the total return of a stock investment will equal its dividend yield plus its dividend growth rate:
R = D/P + G
where
D is next year's annual dividend;
P is the current share price;
G is the growth rate.
For the origin of the equation, see the "constant growth case" formula near the bottom of this stock valuation page - but think "dividends" where the page says "earnings".
(Or if you're more of a people-person, you can read about the career of
Myron J. Gordon.)
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