The dividend discount model (DDM) is a valuation method used to estimate the value of a company's stock based on the present value of its expected future dividends. This model assumes that dividends are the primary source of value for shareholders and calculates the intrinsic value of a stock by discounting these future dividends back to their present value using an appropriate discount rate. The DDM is closely linked to common stock valuation, as it provides a straightforward framework for investors to assess whether a stock is undervalued or overvalued based on its dividend payments.
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