Multi-Stage Dividend Discount Models

Unlike the Multiple Holding Period DDM previously described, the Multi-Stage Dividend Discount Model allows for multiple growth rates in calculating a stock value.
The allowance of multiple growth rates is more realistic, companies commonly experience a growth phase, a transitional phase (as new competition enters the market driving down returns), and a mature phase.
Naturally this implies that a Three Stage DDM could be tested; see the official curriculum for a detailed example.
The Multi-Stage DDM presents the analyst an opportunity to account for the different growth rates that a company may experience in these different growth phases.
The Two Stage High Growth followed by Stable Growth DDM:
The formula for a High Growth followed by Stable Growth Two Stage DDM may look daunting at first, but its components are logical and build upon the foundation of the basic DDM principles.

Unlike the Multiple Holding Period DDM previously described, the Multi-Stage Dividend Discount Model allows for multiple growth rates in calculating a stock value.
The allowance of multiple growth rates is more realistic, companies commonly experience a growth phase, a transitional phase (as new competition enters the market driving down returns), and a mature phase.
Naturally this implies that a Three Stage DDM could be tested; see the official curriculum for a detailed example.
The Multi-Stage DDM presents the analyst an opportunity to account for the different growth rates that a company may experience in these different growth phases.
The Two Stage High Growth followed by Stable Growth DDM:
The formula for a High Growth followed by Stable Growth Two Stage DDM may look daunting at first, but its components are logical and build upon the foundation of the basic DDM principles.