Three ways to value the same dividend stock. Three different answers. Yesterday Coca-Cola closed at $88.51. Here is what each method said the business was worth. Think of three appraisers walking through the same house. One prices it off the rent it collects. One off what the neighbors paid. One off what it would cost to build again. Nobody is lying. They are answering different questions. The Dividend Discount Model values the stock as the stream of dividends it pays you. Next year's dividend of $2.22, divided by an 8% required return minus 4.5% long-run dividend growth. Fair value: $63. Dividend Yield Theory assumes a quality payer drifts back to its own average yield. Coke's $2.12 dividend divided by its 10-year average yield of 3.05%. The stock yields 2.40% today, which is thin by its own history. Fair value: $70. Discounted Cash Flow ignores the dividend and values every dollar of cash the business generates. Start with the $12.2B of free cash flow Coke guides to for 2026, grow it 5% and discount it at 8%. Then subtract $29.7B of net debt. Fair value: $57. Three methods. A 22% spread from low to high. And the stock trades above all three. That spread is your margin of safety. Move the discount rate one point and every number here moves. You will never land on the exact right price for a business. You do not need to. You need to know where today's price sits against the range. Which method do you run first on a dividend stock? *** P.S. Want to know if your dividends are safe? Check all 1,000 dividend payers in one free sheet. Every streak, payout ratio, and debt load for Coca-Cola, Johnson & Johnson, Realty Income, and 997 more. Straight from SEC filings, updated monthly. → https://lnkd.in/eKyaWabi
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Bill @billmc · 15d
Love your content. Keep up the good work.
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