Next Year's Dividend (D1)
$2.08
Stock Constant Growth Calculator
Value a stock using the Gordon Growth (Dividend Discount) Model.
Intrinsic Value per Share
$41.60
Growth Rate
4.00%
Required Return
9.00%
How to use the Stock Constant Growth Calculator
The Stock Constant Growth Calculator is free and runs entirely in your browser — no sign-up, and nothing you enter leaves your device. It opens pre-filled with a realistic example, so you can see how it works before replacing any figure with your own; the results update as you type. Press Calculate to refresh the result panel, or Reset to return to the example.
The inputs it asks for:
- Most Recent Annual Dividend (D0) — a dollar amount.
- Constant Growth Rate (g) — a percentage (enter 6 for 6%).
- Required Rate of Return (r) — a percentage (enter 6 for 6%).
The formula
This is the Gordon Growth (dividend discount) model: a stock whose dividend grows at a steady rate forever is worth next year's dividend divided by the gap between your required return and that growth rate:
Value = D₁ / (r − g) where D₁ = D₀·(1 + g)- D₀ / D₁
- this year's and next year's annual dividend
- g
- the constant dividend growth rate
- r
- your required rate of return
The model only works when r > g — otherwise the value is infinite or negative, which is why the calculator requires it. It's exquisitely sensitive near r ≈ g: a small change in either assumption swings the value hugely, so treat the output as a scenario, not a price.
Worked example
Using the example values — Most Recent Annual Dividend (D0) $2.00, Constant Growth Rate (g) 4%, Required Rate of Return (r) 9% — the Stock Constant Growth Calculator returns a Intrinsic Value per Share of $41.60. It also reports Next Year's Dividend (D1) ($2.08), Growth Rate (4.00%), Required Return (9.00%).
Prefer your own numbers? Change any field above and this recomputes instantly.
Key terms
- Dividend discount model
- Valuing a stock as the present value of its future dividends.
- Gordon Growth Model
- The constant-growth version — value = D₁ ÷ (r − g).
- Required return (r)
- The annual return you demand to hold the stock.
- Constant growth (g)
- The assumed perpetual dividend growth rate.
Frequently asked questions
Why must the required return exceed the growth rate?
If dividends grew as fast as (or faster than) your discount rate forever, their present value wouldn't converge — the formula would return an infinite or negative value. Perpetual growth above the discount rate isn't realistic.
Why is the value so sensitive to the inputs?
Because it divides by the small gap (r − g). When r and g are close, tiny changes in either produce large swings in value — a key caution with this model.
What stocks does it suit?
Mature, steady dividend payers whose growth is plausibly stable. It fits fast-growing or non-dividend stocks poorly; a two-stage model (the non-constant growth calculator) handles a high-growth phase.