# 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.

- Calculator id: `gordon-growth` · Category: Investing & Real Estate (`investing`) · Tool name: `calculate_gordon_growth_value`
- Canonical page: https://tttkmbb.com/investing/gordon-growth · This document: https://tttkmbb.com/investing/gordon-growth.md · JSON definition: https://tttkmbb.com/investing/gordon-growth.json

## Purpose

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.

**Use when:** 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.

## Input

| Parameter | Type | Unit | Required | Description |
| --- | --- | --- | --- | --- |
| `next_dividend` | number |  | optional | Expected dividend per share over the coming year; takes precedence over current_dividend. (> 0, max 1000000) |
| `current_dividend` | number |  | optional | Most recent annual dividend per share; D1 = D0 × (1 + g) when next_dividend is omitted. (> 0, max 1000000) |
| `required_return_percent` | number | % per year | required | Investor's required rate of return (cost of equity) in percent. (> 0, max 100) |
| `growth_percent` | number | % per year | required | Constant annual dividend growth rate in percent; must be below the required return. (min -50, max 100) |
| `current_price` | number |  | optional | Optional market price, used for the implied return and the over/under-valuation check. (> 0, max 10000000) |

## Output

| Field | 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). |

## 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.

## Data Sources

- Wikipedia – Dividend discount model — https://en.wikipedia.org/wiki/Dividend_discount_model (reference, retrieved 2026-09-24)

Data freshness: `static`. Deterministic formula with fixed constants; results never go stale. Inputs supplied by the caller determine the output.

## API

- `GET https://tttkmbb.com/api/v1/calculate/gordon-growth?required_return_percent=…&growth_percent=…`
- `POST https://tttkmbb.com/api/v1/calculate/gordon-growth` with JSON body `{"inputs": {…}}`
- Response: unified envelope (`success`, `request`, `result.values`, `result.units`, `sources`, `freshness`, `timestamp`, `next_actions`, `links`); see https://tttkmbb.com/docs/response-format.md
- Schema: https://tttkmbb.com/api/v1/calculators/gordon-growth · OpenAPI operationId `calculate_gordon_growth_value` in https://tttkmbb.com/openapi.json
- Authentication: none. Rate limit: fair use, see https://tttkmbb.com/docs/rate-limits.md.

## MCP

- Server: `https://tttkmbb.com/mcp` (Streamable HTTP, JSON-RPC 2.0, no auth)
- Tool:  `run_calculator` with `{"calculator_id": "gordon-growth", "inputs": {…}}`

## Example

- D1 2, required 8 %, growth 3 %: inputs `{"next_dividend":2,"required_return_percent":8,"growth_percent":3}` → `{"intrinsic_value":40,"dividend_used":2}`
- D0 2, growth 3 %, required 8 %, price 45: inputs `{"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
```

## Limitations

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. 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. All values are computed from the formula above; no measurement or live data is involved.

## 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

- [Dividend Yield Calculator](https://tttkmbb.com/finance/dividend-yield.md) — Yield and income of the same dividend stream.
- [DCF Valuation Calculator](https://tttkmbb.com/investing/dcf-valuation.md) — Two-stage valuation when growth is not constant.
- [CAPM Calculator](https://tttkmbb.com/investing/capm.md) — Estimate the required return from beta.