คู่มือโดยละเอียดเร็วๆ นี้
เรากำลังจัดทำคู่มือการศึกษาที่ครอบคลุมสำหรับ Gordon Growth Model (DDM) กลับมาเร็วๆ นี้เพื่อดูคำอธิบายทีละขั้นตอน สูตร ตัวอย่างจริง และเคล็ดลับจากผู้เชี่ยวชาญ
The Gordon Growth Model (GGM), formally known as the Gordon-Shapiro Dividend Discount Model, is a method of valuing a stock based on the premise that a company's intrinsic value equals the present value of all its future dividend payments, which are assumed to grow at a constant perpetual rate. Named after economists Myron Gordon and Eli Shapiro who published the foundational work in 1956, the model is one of the most widely taught and applied stock valuation techniques in finance education and professional practice. The model rests on three core inputs: the dividend expected over the next twelve months (D₁), the investor's required rate of return (r), and the constant long-run dividend growth rate (g). The required return is typically estimated using CAPM, while the growth rate is usually grounded in the company's long-run sustainable growth rate — often approximated by return on equity × retention ratio, or benchmarked against nominal GDP growth for mature economies. The model's elegant single-formula output makes it popular for quick valuations of mature, dividend-paying companies. GGM is most reliably applied to businesses with stable, predictable cash flows and established dividend track records — large utilities, regulated infrastructure companies, blue-chip consumer staples, and REITs. It fails for growth companies that pay no dividends, cyclical businesses with volatile payouts, and any company where the assumed growth rate (g) approaches or exceeds the required return (r), which causes the denominator to collapse toward zero and produces mathematically absurd valuations. Beyond basic valuation, the GGM can be algebraically rearranged to extract the market's implied required return or implied growth rate from the current price — a useful tool for benchmarking management expectations against market pricing and for identifying potential over- or under-valuation signals in dividend-paying sectors.
P = D₁ / (r − g) where D₁ = D₀ × (1 + g) Rearranged for implied return: r = (D₁/P) + g Rearranged for implied growth: g = r − (D₁/P)
- 1Identify the most recent annual dividend per share (D₀) from the company's dividend history or investor relations page.
- 2Estimate the long-run sustainable dividend growth rate (g). Common approaches: (a) historical average dividend growth over 5–10 years; (b) sustainable growth = ROE × retention ratio; (c) benchmark against long-run nominal GDP growth (typically 2–5% for developed markets).
- 3Determine the required rate of return (r) using CAPM: r = Rf + β × ERP. Ensure r > g, otherwise the model produces a negative or infinite price — an economically meaningless result.
- 4Project next year's dividend: D₁ = D₀ × (1 + g).
- 5Apply the Gordon formula: P = D₁ / (r − g).
- 6Compare the calculated intrinsic value to the current market price. If P > market price, the stock may be undervalued; if P < market price, it may be overvalued relative to the model's assumptions.
- 7Conduct sensitivity analysis: vary g by ±1% and r by ±1% to see the range of implied values — the model is highly sensitive to small input changes.
If the stock trades at $48, it appears ~15% undervalued relative to GGM intrinsic value.
Utility stocks are GGM's natural home: regulated revenues, stable earnings, consistent dividend payout ratios. The 3.5% growth assumption aligns with typical regulated utility revenue growth tied to rate case decisions and infrastructure investment recovery.
Priced at $52, the stock appears overvalued by GGM — either growth assumptions need revising upward or the required return downward.
Consumer staples like food and beverage companies often command premium valuations because investors accept lower required returns for their defensive characteristics. If the market price of $52 is taken as correct, the implied required return is only r = ($1.89/$52) + 0.05 = 8.6%, suggesting the market prices this stock more defensively than our CAPM estimate suggests.
The high D₀ relative to price makes REITs appear attractively valued when r is only modestly above g.
REITs are legally required to distribute at least 90% of taxable income, making GGM particularly applicable. Low growth assumptions (2% ≈ inflation) are realistic for mature property portfolios. The model highlights why REITs are primarily income investments: the dividend yield term (D₁/P) dominates the total return.
The market is pricing in 6.4% perpetual dividend growth — above long-run GDP; investors should ask whether this is realistic.
This reverse-engineering of the GGM is particularly valuable for analyst work. If a stock's implied growth rate significantly exceeds long-run GDP or the company's own ROE-based sustainable growth, the market may be applying unrealistic optimism. Documenting the implied growth helps frame the investment case clearly.
Mortgage lenders and loan officers use Gordon Growth Model to structure repayment schedules, compare fixed versus adjustable rate options, and calculate total borrowing costs for residential and commercial real estate transactions across different term lengths.
Personal finance advisors apply Gordon Growth Model when counseling clients on debt reduction strategies, comparing the mathematical benefit of accelerated payments against alternative investment returns to determine the optimal allocation of surplus cash flow.
Credit unions and community banks rely on Gordon Growth Model to generate accurate Truth in Lending disclosures, ensure regulatory compliance with TILA and RESPA requirements, and provide borrowers with standardized cost comparisons across competing loan products.
Corporate treasury departments use Gordon Growth Model to model the cost of revolving credit facilities, term loans, and commercial paper programs, optimizing the company's capital structure and minimizing weighted average cost of debt financing.
Zero or negative interest rate
In practice, this edge case requires careful consideration because standard assumptions may not hold. When encountering this scenario in gordon growth model calculations, practitioners should verify boundary conditions, check for division-by-zero risks, and consider whether the model's assumptions remain valid under these extreme conditions.
Balloon payment at maturity
In practice, this edge case requires careful consideration because standard assumptions may not hold. When encountering this scenario in gordon growth model calculations, practitioners should verify boundary conditions, check for division-by-zero risks, and consider whether the model's assumptions remain valid under these extreme conditions.
Variable rate mid-term adjustment
In practice, this edge case requires careful consideration because standard assumptions may not hold. When encountering this scenario in gordon growth model calculations, practitioners should verify boundary conditions, check for division-by-zero risks, and consider whether the model's assumptions remain valid under these extreme conditions.
| Growth Rate (g) | r = 8% | r = 9% | r = 10% | r = 11% |
|---|---|---|---|---|
| 3% | $50.00 | $41.67 | $35.71 | $31.25 |
| 4% | $62.50 | $50.00 | $41.67 | $35.71 |
| 5% | $83.33 | $62.50 | $50.00 | $41.67 |
| 6% | $125.00 | $83.33 | $62.50 | $50.00 |
What is the Gordon Growth Model used for?
GGM is primarily used to estimate the intrinsic value of mature, dividend-paying stocks such as utilities, REITs, and large-cap consumer staples. It is also used by corporate finance practitioners to estimate the cost of equity (by rearranging: r = D₁/P + g) and by equity analysts to quickly screen for potentially undervalued or overvalued dividend stocks. In academic finance, it is a foundational teaching tool for present value principles applied to equities.
What happens if g is greater than or equal to r?
The model breaks down entirely. If g ≥ r, the denominator (r − g) becomes zero or negative, producing an infinite or negative price — neither of which makes economic sense. This is a fundamental constraint: GGM requires g < r in perpetuity. If you believe a company will genuinely grow faster than the discount rate indefinitely, use a multi-stage DDM that allows a high near-term growth phase tapering to a sustainable terminal growth rate below r.
How is the growth rate estimated?
Several methods exist: (1) Historical average: compute compound annual growth in dividends per share over 5–10 years. (2) Sustainable growth: g = ROE × retention ratio (1 − payout ratio); this ties growth to the company's internal reinvestment rate and return. (3) Analyst consensus: use the median long-term EPS growth estimate from sell-side analysts. (4) GDP-anchor: for very mature companies, anchor g to long-run nominal GDP growth of the company's primary market (2–4% for developed economies). The most conservative and theoretically sound is to cap g at expected nominal GDP growth.
How is the Gordon Growth Model different from a full DCF?
A standard DCF explicitly forecasts free cash flows or earnings for 5–10 years, then applies a terminal value. GGM is a perpetuity shortcut that assumes dividends grow at a constant rate forever starting immediately — essentially a one-stage terminal value. The full DCF is more flexible (handles non-dividend-paying companies, varying growth phases) but more data-intensive. GGM is faster and more transparent, making it useful for regulated industries where cash flow predictability is high.
Can GGM value a company that doesn't pay dividends?
Not directly. However, practitioners extend GGM using free cash flow to equity (FCFE) instead of dividends — the same formula but with FCFE per share replacing D₁. This is valid because FCFE represents what could theoretically be paid as dividends. For companies that retain all cash flows for growth (e.g., early-stage tech), GGM-style models still don't work well because the implicit assumption of constant growth from the current period breaks down.
What is the H-model and how does it extend GGM?
The H-model (Fuller and Hsia, 1984) is a two-stage extension that assumes an initially high but linearly declining growth rate converging to a stable long-run rate, rather than the abrupt two-stage transition of the standard multi-stage DDM. It produces a clean closed-form: P = [D₀ × (1+gL) + D₀ × H × (gS − gL)] / (r − gL), where H is the half-life of the high-growth period and gS, gL are short- and long-run growth rates. It better fits companies transitioning from high to stable growth.
Why is GGM sensitive to small input changes?
Because the denominator (r − g) is often a small number (e.g., 3–5%), small absolute changes in either r or g produce large percentage changes in the denominator and therefore large swings in the output price. For example, with r=9% and g=5%, the spread is 4%. If g increases to 6%, the spread halves to 3% and the price doubles. This extreme sensitivity is both a limitation and a feature — it reveals how much of a stock's value depends on the long-run growth assumption.
เคล็ดลับโปร
Use the GGM's implied growth rate (g = r − D₁/P) as a valuation diagnostic tool. If the implied growth rate exceeds the company's long-run sustainable growth rate by a wide margin, the stock may be priced for perfection. Compare the implied growth to the analyst consensus long-term EPS growth rate and to the company's ROE × (1 − payout ratio) — meaningful divergences warrant scrutiny.
คุณรู้ไหม?
Myron Gordon published the model in 1956 — the same year the Dow Jones Industrial Average first closed above 500 points. Gordon himself was sceptical of the efficient market hypothesis and believed fundamental valuation anchored in dividends was the key to long-run investment returns. His model remains the most widely taught equity valuation framework 70 years later.