Tài chính ngân hàng - Discounted dividend valuation

Discounted Dividend ValuationPresenterVenueDateDiscounted Cash Flow Models2Choice of Discounted Cash Flow Models3Valuing Common Stock Using a Multi-period DDM4Example: Valuing Common Stock Using a Multperiod DDM0123D$1.00 $1.05 $1.10 P$20.00 Example: Valuing Common Stock using a Multperiod DDMValuing Common Stock Using the Gordon Growth ModelExample: Valuing Common Stock Using the Gordon Growth ModelRisk-free rate3.0%Equity risk premium6.0%Beta1.20Current dividend$2.00Dividend growth rate5.0%Current stock price$24 .00Valuing Common Stock Using the Gordon Growth ModelExample: Valuing Preferred StockExample: Calculating the Implied Growth Rate Using the Gordon Growth modelUsing the previous common stock example and the current stock price of $24, what is the implied growth rate?Calculating the Implied Required Return Using the Gordon Growth ModelExample: Calculating the Implied Required Return Using the Gordon Growth ModelUsing the previous common stock example and the current stock price of $24, what is the implied required return?Present Value of Growth OpportunitiesPresent Value of Growth OpportunitiesExample: Present Value of Growth OpportunitiesStock price$80 .00Expected earnings$5 .00Required return on stock10%Example: Present Value of Growth OpportunitiesExample: Present Value of Growth OpportunitiesUsing the Gordon Growth Model to Derive a Justified Leading P/EUsing the Gordon Growth Model to Derive a Justified Trailing P/EExample: Using the Gordon Growth Model to Derive a Justified P/E Stock price$50 .00Trailing earnings per share$4 .00Current dividends per share$1.60Dividend growth rate5.0%Required return on stock9.0%Example: Using the Gordon Growth Model to Derive a Justified Leading P/EExample: Using the Gordon Growth Model to Derive a Justified Trailing P/EIssues Using the Gordon Growth ModelStrengthsSimple and applicable to stable, mature firmsCan be applied to entire marketsg can be estimated using macro dataCan be applied to firms that repurchase stockLimitationsNot applicable to non-dividend-paying firmsg must be constantStock value is very sensitive to r – gMost firms have nonconstant growth in dividendsChoice of Discounted Cash Flow ModelsGrowthRapidly  earningsHeavy reinvestmentSmall or no dividendsTransitionEarnings growth slowsCapital reinvestment slowsFCFE & dividends MaturityROE = rEarnings & dividends growth maturesGordon growth model usefulGeneral Two-Stage DDMExample: General Two-Stage DDMCurrent dividend = $2.00Growth Current dividend = $2.00Growth for next three years = 15 percentLong-term growth = 4 percentRequired return = 10 percentfor next three years = 15 percentLong-term growth = 4 percentRequired return = 10 percentExample: General Two-Stage DDMStep 1: Calculate the first three dividends:D1 = $2.00 x (1.15) = $2.30D2 = $2.30 x (1.15) = $2.6450D3 = $2.6450 x (1.15) = $3.0418Step 2: Calculate the year 4 dividend:D4 = $3.0418 x (1.04) = $3.1634Step 3: Calculate the value of the constant growth dividends:V3 = $3.1634 / (0.10 – 0.04) = $52.7237Example: General Two-Stage DDMExample: General Two-Stage DDMUsing the previous example, now we’ll use the trailing P/E to determine the terminal valueThe D4 is $3.1634Assume also that the projected P/E is 13.0 in year 4 and that the firm will pay out 60 percent of earnings as dividendsYear 4 earnings are then $3.1634 / 0.60 = $5.2724The stock price in year 4 is then $5.2724 × 13 = $68.54 Example: General Two-Stage DDMTwo-Stage H-ModelExample: Two-Stage H-ModelCurrent dividend$3.00gs20%gL6%H5Required return on stock10%Current stock price$120 Example: Two-Stage H-ModelSolving for the Required Return Using the Two-Stage H-ModelExample: Three-Stage ModelFirm pays a current dividend of $1.00Growth rate is 20 percent for next two yearsGrowth then declines over six years to stable rate of 5 percentRequired return is 10 percentCurrent stock price is $50Three-Stage ModelAssumes three distinct growth stages:First stage of growthSecond stage of growthStable-growth phaseH-model can be used for last two stages if growth declines linearlyTHREE-STAGE MODEL EXAMPLEEstimating the Growth RateIndustry or Macroeconomic Averageg = b × ROEDuPont formulaROE = rROE = industry ROEThe Sustainable Growth RategbROEThe DuPont ModelExample: DuPont ModelNet profit margin5.00%Total asset turnover1.5Equity multiplier2.0Retention ratio60%Example: DuPont ModelChoice of Discounted Cash Flow ModelsDividend discount models, free cash flow models, residual income modelsDividend models most appropriate forMature, profitable, dividend-paying firmsNoncontrolling shareholder perspective Gordon Growth ModelAssumes constant g and r > gApplicable to mature, stable firmsEstimated value very sensitive to r – g denominatorSummaryUses of Gordon Growth ModelPreferred stock valuation where g = 0PVGO – Value from future growthJustified leading and trailing P/EsImplied r and gPhases of GrowthGrowthTransitionMaturitySummaryMultistage ModelsGeneral two-stage model: growth abruptly declinesH-model: growth gradually declinesThree-stage model: can utilize general or H-model Sustainable Growth Rateg = Retention ratio × ROEDuPont analysis:ROE = Profit margin × Asset turnover × Equity multiplierSummary