Gordon dividend growth model part 1 The dividend growth model is one of the earliest, if not the earliest, ways of valuing a stock. I might do a post on the derivation of this formula, but I shall skip that for now. This is the formula: Market price (P) = d / (r - g) D is the current dividends or last dividends declared by the company. It is in dollar terms. R is the expected return that you are aiming for when you purchase the stock. I assume a 7% for illustrative purpose. Lastly, g is the dividend growth rate. We can use historical rates or predict it. I use 5% for this. Assume the company has just paid out a dividend of $0.20 per share, in order to get a 7% return, I would need to purchase this stock below $10. $0.20 / (7% - 5%) ......