Classic investor frameworks · Intrinsic value
John Burr Williams · Dividend Discount Model (DDM)
Defines equity value as the present value of all future shareholder distributions, a foundational cash-flow valuation framework.
- Guide level
- Practical
- Output
- Intrinsic value
Core formula
Equity value = Σ dividendₜ / (1 + cost of equity)ᵗHow to interpret it
Defines equity value as the present value of all future shareholder distributions, a foundational cash-flow valuation framework.
The output should be read as a scenario or decision aid, not as a guaranteed price target. Compare it with at least one method based on different economic assumptions.
Practical workflow
- Normalize the latest public financial and operating data.
- Choose assumptions that match the company's economics and accounting structure.
- Calculate conservative, base and optimistic cases where the method permits.
- Compare the result with market pricing and an independent valuation method.
- Document the assumptions that drive the largest changes in value.
Key limitation
Reported dividends may understate capacity or reflect temporary policy rather than economic value.
How Stockinsky uses it
Stockinsky uses this framework only when the company type and available data support it. Professional valuations expose assumptions, sources and warnings instead of presenting false precision.