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Dividend discount model (DDM)

The Dividend Discount Model is used to estimate a company’s stock price. The approach is founded on the view that the stock’s present value is equal to the current value of all future dividend payments when discounted back to the present. If the present value determined using the DDM is more than the current trading price, the company is undervalued, and a ‘buy’ decision is warranted.

Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you should not expect to be protected if something goes wrong.

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