Dividend Discount Model

The DDM method (Dividend Discount Model) is a company valuation methodology based on the estimation of the company's value based on the cash flows generated by expected future dividends. In particular, the DDM estimates the value of the firm as the sum of the discounted cash flows generated by expected future dividends.

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The DDM method can be convenient in certain cases, such as when the company has a history of stable and predictable dividend payments, or a well-defined financial structure. However, it is important to note that the DDM method has some limitations. For example, the model assumes that future dividends are constant and predictable over time, which may not be realistic in many situations. For this reason, it is advisable to combine it with other methodologies, to provide a complete overview of the evaluation.