The price of the share or the stock you have invested in depends largely on the dividends declared by the company. It’s not that the company pays off all the dividends to the investors. As a matter of fact, the company retains some part of it to re-invest in some more ventures and processes. This way it is able to divert funds towards initial investments in various projects. These projects determine the growth of the company and the returns they are going to add to the company’s profile. These investments generally have a consistently increasing growth rate which implies that the consecutive year’s dividends will also witness an increase proportional to the growth rate of the returns. Let us check out some of the models that helps in determining the stock price based on the underlying dividend policy. Your stocks and investments are subjected to these factors and policies. ? There are 5 basic models to evaluate the market price of the share and these are the Traditional Model, Walter Model, Gordon Model, MM Approach,Coach Outlet Store Online, and Corporate Dividend Behavior Model. Except for the first and the last models,Coach Factory Outlet, in all the other models, the dividend along with the growth rate is discounted by the cost of capital i.e,Coach Outlet Online. the money required to raise the equity capital,Coach Outlet. Each of these models is unique in its own way and best suitable based on the type of the company to which the share belongs. These are generally used by various analysts to understand and know the price of a company at a given point of time. You have to choose carefully theDividend Discount Model or Gordon Model(for assessing share price) or any other according to your requirement. ? The dividend discount models are also very useful in evaluating the cost of the capital and the growth rate guaranteed by the company,Coach Outlet Online Store. These models are again based on discounting the dividends of a company with that of the fair price and growth rate. It is very important to understand the impact and use of the data arrived by using these models. This data can be used to understand the fair price of the stock price and know if currently the stock is underpriced or over. This helps the investors to change positions easily. If the stock is underpriced, then it is best to buy this stock now, as the market price is less than the actual worth of this share. If you already hold a long position, then do not sell of an underpriced share, as you will only book negative profit. It is suggested to wait for a reversal. ? However, it the stock is overpriced, and then it is time to make huge profits by selling the share at a higher price. So with this knowledge, one can really be a wise player in the stock market. Rate this article Post a comment Related articles: Coach bags Howell Coach Factory Outlet Online During 3 years since 1504 coach outlet store