Dividend Discount Model Workbook: Valuing Dividend Stocks Step by Step

Building DDM valuations that you can trust requires working through the arithmetic repeatedly, testing your assumptions, and understanding how sensitive the output is to each input. This workbook provides exactly that — structured numerical exercises, sensitivity analysis templates, and case studies using representative dividend-paying companies. By the end of this course you will be able to complete a full Gordon Growth Model valuation from scratch, build a two-stage DDM with a high-growth and stable phase, produce a sensitivity table that shows how valuation changes across a range of growth and discount rate assumptions, and evaluate dividend safety using payout ratio and free cash flow coverage. What you will learn: - Computing the intrinsic value of a stable dividend stock using the Gordon Growth Model, step by step - Estimating the required return using CAPM: beta, risk-free rate, and equity risk premium inputs - Calculating the sustainable growth rate using return on equity and retention ratio - Building a two-stage DDM model with explicit dividend forecasts for years 1–5 and a terminal value - Constructing a sensitivity table across required return (±1%) and growth rate (±0.5%) dimensions - Analysing dividend safety: payout ratio, earnings coverage, and free cash flow coverage worksheets - Comparing DDM intrinsic value to current market price and characterising the implied margin of safety - Applying DDM to two contrasting companies: a steady utility and a growing consumer staples firm Every module provides a fully worked numerical example followed by a blank template for your own practice. Sensitivity analysis templates are formatted for direct use. Checklists ensure you have checked all inputs before accepting a valuation output. This course is designed for finance students and investors who want to build practical DDM modelling skills. Basic algebra and time value of money familiarity is assumed. This content is purely educational and informational; it does not constitute financial advice.