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Gordon Growth Model Calculator

Values a stock as the next dividend divided by the required return minus the dividend growth rate (Gordon growth model), and when a price is given, reports the implied return and whether the price is above or below the intrinsic value.

When to use

You want an intrinsic value for a stable, dividend-paying stock from its dividend, expected growth and required return, or the return implied by its current price.

Do not use when: The company pays no dividend, growth is not constant (use dcf-valuation) or growth is at or above the required return. Informational only; not financial advice.

Formula

D1 = next_dividend or current_dividend × (1 + g); intrinsic_value = D1 / (r − g); implied_return = D1 / current_price + g, with r = required_return_percent/100 and g = growth_percent/100

Gordon growth (constant-growth dividend discount) model: the value of a perpetuity growing at g discounted at r, valid only for g < r. Results are very sensitive to r − g. Informational mathematics only; not financial advice.

Inputs

Parameter	Type	Unit	Required	Description
`next_dividend`	number		no	Expected dividend per share over the coming year; takes precedence over current_dividend. Range: > 0, ≤ 1000000
`current_dividend`	number		no	Most recent annual dividend per share; D1 = D0 × (1 + g) when next_dividend is omitted. Range: > 0, ≤ 1000000
`required_return_percent`	number	% per year	yes	Investor's required rate of return (cost of equity) in percent. Range: > 0, ≤ 100
`growth_percent`	number	% per year	yes	Constant annual dividend growth rate in percent; must be below the required return. Range: ≥ -50, ≤ 100
`current_price`	number		no	Optional market price, used for the implied return and the over/under-valuation check. Range: > 0, ≤ 10000000

Outputs

Output	Type	Unit	Description
`intrinsic_value`	number		D1 / (r − g).
`dividend_used`	number		next_dividend, or current_dividend × (1 + g).
`implied_return_percent`	number	%	D1 / current_price + g (only when current_price is given).
`over_under_valued`	string		Whether the current price is above or below the model value and by what percentage (only when current_price is given).

Example

D1 2, required 8 %, growth 3 %: {"next_dividend":2,"required_return_percent":8,"growth_percent":3} → {"intrinsic_value":40,"dividend_used":2}

D0 2, growth 3 %, required 8 %, price 45: {"current_dividend":2,"required_return_percent":8,"growth_percent":3,"current_price":45} → {"intrinsic_value":41.2,"dividend_used":2.06,"implied_return_percent":7.58,"over_under_valued":"Overvalued: price 45.00 is 9.22 % above the model value 41.20"}

GET https://tttkmbb.com/api/v1/calculate/gordon-growth?next_dividend=2&required_return_percent=8&growth_percent=3

Machine access

API: GET https://tttkmbb.com/api/v1/calculate/gordon-growth (query parameters) or POST with a JSON body {"inputs": {...}}
Schema: https://tttkmbb.com/api/v1/calculators/gordon-growth · Markdown: https://tttkmbb.com/investing/gordon-growth.md · JSON definition: https://tttkmbb.com/investing/gordon-growth.json
MCP: server https://tttkmbb.com/mcp, tool run_calculator with calculator_id="gordon-growth"
OpenAPI operationId: calculate_gordon_growth_value
Freshness: static. Authentication: none. Rate limit: fair use (see rate limits).

Sources

Wikipedia – Dividend discount model (reference)

FAQ

Should I enter D0 or D1?

Enter the dividend you know. The model needs next year's dividend D1; if you enter the last paid dividend D0, it is grown one year: D1 = D0 × (1 + g).

Why does a small change in growth move the value so much?

The denominator is r − g. With r = 8 % and g = 3 % it is 5 %; raising g to 4 % shrinks it to 4 % and raises the value by 25 %.

Related calculators

Dividend Yield Calculator — Yield and income of the same dividend stream.
DCF Valuation Calculator — Two-stage valuation when growth is not constant.
CAPM Calculator — Estimate the required return from beta.