China Finance Online Co. Limited (JRJC) Simple Dividend Discount Model

China Finance Online Co. Limited

JRJC (NASDAQ)

(%)

Models
China Finance Online Co. Limited Simple Dividend Discount Model

# Render description block
model.render_description({
    "data": r"""
## Simple Dividend Discount Model

This model estimates the value of companies that have reached maturity and pay stable dividends as a significant percentage of their **free cash flow to equity**, with no share buybacks or high growth expectancy.

### Fair Value Formulas

`Fair Value` = `Next Year's Expected Dividend` / (`
Discount Rate` - `Growth In Perpetuity`)

`Next year's expected dividend` = `Current Dividend per Share` * (1 + `Growth In Perpetuity`)

> This model was inspired by Prof. Aswath Damodaran's spreadsheet [⬇️ddmst.xls](https://pages.stern.nyu.edu/~adamodar/pc/ddmst.xls)

> Learn more: Prof. Aswath Damodaran's [Guide to Dividend Discount Models](https://pages.stern.nyu.edu/~adamodar/pdfiles/valn2ed/ch13.pdf)
""",
    "properties": {
        "width": "responsive"
    }
})

# --- Assumptions
assumptions.set({
    "timeseries": "annual",
    "data": {
        "#historicalYears": """
            3
        """,
        "#forecastYears": """
            5
        """,
        "#beta": """
            profile:beta
        """,
        "%riskFreeRate": """
            treasury:year10
        """,
        "%equityRiskPremium": """
            risk:totalEquityRiskPremium
        """,
        "%discountRate": """
            assumption:%riskFreeRate + assumption:#beta * assumption:%equityRiskPremium
        """,
        "%growthInPerpetuity": """
            2.5%
        """,
        "#expectedDividend": """
            dividend:adjDividend * (1 + assumption:%growthInPerpetuity)
        """,
    },
    "titles": {
        "#historicalYears": "Historical Years",
        "#forecastYears": "Forecast Years",
        "#beta": "Beta",
        "%riskFreeRate": "Risk Free Rate",
        "%equityRiskPremium": "Equity Risk Premium",
        "%discountRate": "Discount Rate",
        "%growthInPerpetuity": "Growth In Perpetuity",
        "#expectedDividend": "Expected Dividend",
    },
    "properties": {
        "width": "responsive",
        "title": "Assumptions",
        "id": "component-2",
        "bindTo": None
    },
    "descriptions": {
        "#historicalYears": r"""
The number of years of historical data used to calculate averages and trends for analysis.
        """,
        "#forecastYears": r"""
The number of years into the future for which the analysis projects financial performance and metrics.
        """,
        "#beta": r"""
Beta measures the volatility of a stock's price in relation to the overall stock market. A higher beta indicates greater price fluctuations relative to the market.
        """,
        "%riskFreeRate": r"""
The risk-free rate represents the return an investor expects from an absolutely risk-free investment over a specified time period. By default, it is set to the current yield of the U.S. 10-Year Treasury Bond.
        """,
        "%equityRiskPremium": r"""
The market risk premium is the additional return over the risk-free rate expected by investors for equity risk.
        """,
        "%discountRate": r"""
`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
        """,
        "%growthInPerpetuity": r"""
The stable rate at which the company's book value is assumed to grow in perpetuity.
        """,
        "#expectedDividend": r"""
The estimated annual dividend per share for the next year.
        """,
    },
    "hierarchies": [
        {
            "parent": "%discountRate",
            "children": [
                "#beta",
                "%riskFreeRate",
                "%equityRiskPremium",
            ]
        },
    ]
})

# --- Fair Value Calculation
data.compute_results({
    "#fairValue": """
        assumption:#expectedDividend / ( assumption:%discountRate - assumption:%growthInPerpetuity)
    """,
}, timeseries="annual")

model.render_results({
    "timeseries": "annual",
    "data": {
        "dividend:adjDividend": {
            "label": "Current dividend per share",
            "type": "$"
        },
        "assumption:%growthInPerpetuity": {
            "label": "Growth In Perpetuity",
            "type": "%"
        },
        "assumption:#expectedDividend": {
            "label": "Next year's expected dividend",
            "type": "$"
        },
        "assumption:%discountRate": {
            "label": "Cost of Equity (Discount Rate)",
            "type": "%"
        },
        "result:#fairValue": {
            "label": "Fair Value",
            "type": "$"
        },
    },
    "properties": {
        "title": "Fair Value Calculation",
        "width": "responsive",
        "hidden_keys": []
    }
})

# --- Forecast Dividends
data.compute({
    "income:eps": """
        income:eps:-1 * (1 + assumption:%growthInPerpetuity)
    """,
    "dividend:adjDividend": """
        dividend:adjDividend:-1 * (1 + assumption:%growthInPerpetuity)
    """,
}, forecast=data.get("""
    assumption:#forecastYears
"""), timeseries="annual")

model.render_chart({
    "timeseries": "annual",
    "data": {
        "income:eps": "Earnings per Share",
        "dividend:adjDividend": "Dividend per Share",
    },
    "start": -5,
    "end": data.get("""
        assumption:#forecastYears
    """),
    "properties": {
        "title": "Forecast Dividends",
        "include_ltm": True,
        "set_editable": [],
        "hidden_keys": [],
        "bar_keys": [],
        "width": "full"
    }
})

# --- Fair Value
model.set_final_value({
    "value": data.get("""
        result:#fairValue
    """, timeseries="annual"),
    "units": "$",
    "title": "Fair Value",
    "properties": {
        "width": "responsive" 
    }
})

# Render description block
model.render_description({
    "data": r"""
## Understanding the Calculations

The **Free Cash Flow to Equity** represents the cash available to the common shareholders to be paid out as dividends or used for share buybacks.

`Free Cash Flow to Equity` = `Free Cash Flow to the Firm` + `Net Borrowing`

For the Dividend Discount Model to be appropriate, the FCFE payout ratio should represent a significant portion of FCFE, typically over 50%.

`FCFE Payout Ratio` = `Total Dividends Paid` / `Free Cash Flow to Equity`
""",
    "properties": {
        "width": "responsive"
    }
})

# --- FCFE vs. Dividends
data.compute({
    "user:netBorrowing": """
        balance:totalDebt - balance:totalDebt:-1
    """,
    "user:freeCashFlowToEquity": """
        flow:freeCashFlow + user:netBorrowing
    """,
    "user:totalDividendsPaid": """
        dividend:adjDividend * income:weightedAverageShsOut
    """,
    "user:%fcfePayoutRatio": """
        user:totalDividendsPaid / user:freeCashFlowToEquity
    """,
}, forecast=0, timeseries="annual")

model.render_table({
    "timeseries": "annual",
    "data": {
        "flow:freeCashFlow": "Free Cash Flow to the Firm",
        "user:netBorrowing": "Net Borrowing",
        "user:freeCashFlowToEquity": "Free Cash Flow to Equity (FCFE)",
        "user:totalDividendsPaid": "Total Dividends Paid",
        "user:%fcfePayoutRatio": "FCFE Payout Ratio",
    },
    "start": data.get("""
        -assumption:#historicalYears
    """),
    "end": 0,
    "properties": {
        "title": "FCFE vs. Dividends",
        "order": "descending",
        "number_format": "M",
        "include_ltm": True,
        "display_averages": False,
        "width": "responsive"
    }
})

Error at line 182: None is not a valid number in property 'value'.

Simple Dividend Discount Model

This model estimates the value of companies that have reached maturity and pay stable dividends as a significant percentage of their free cash flow to equity, with no share buybacks or high growth expectancy.

Fair Value Formulas

Fair Value = Next Year's Expected Dividend / (Discount Rate - Growth In Perpetuity)

Next year's expected dividend = Current Dividend per Share * (1 + Growth In Perpetuity)

This model was inspired by Prof. Aswath Damodaran's spreadsheet ⬇️ddmst.xls

Learn more: Prof. Aswath Damodaran's Guide to Dividend Discount Models

Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta measures the volatility of a stock's price in relation to the overall stock market. A higher beta indicates greater price fluctuations relative to the market.	#
↳ Risk Free Rate Risk Free Rate The risk-free rate represents the return an investor expects from an absolutely risk-free investment over a specified time period. By default, it is set to the current yield of the U.S. 10-Year Treasury Bond.	%
↳ Equity Risk Premium Equity Risk Premium The market risk premium is the additional return over the risk-free rate expected by investors for equity risk.	%
Historical Years Historical Years The number of years of historical data used to calculate averages and trends for analysis.	#
Forecast Years Forecast Years The number of years into the future for which the analysis projects financial performance and metrics.	#
Growth In Perpetuity Growth In Perpetuity The stable rate at which the company's book value is assumed to grow in perpetuity.	%
Expected Dividend Expected Dividend The estimated annual dividend per share for the next year.	#

Fair Value Calculation
Current dividend per share
Growth In Perpetuity	2.5%
Next year's expected dividend
Cost of Equity (Discount Rate)	10.29%
Fair Value

Forecast Dividends

Monetary values in USD

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Simple Dividend Discount Model

Fair Value Formulas

Assumptions

Discount Rate

Beta

Risk Free Rate

Equity Risk Premium

Historical Years

Forecast Years

Growth In Perpetuity

Expected Dividend

Fair Value Calculation

Forecast Dividends

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)

Market is Open

After-Hours Quote

Market is Open

After-Hours Quote

China Finance Online Co. Limited Simple Dividend Discount Model

Simple Dividend Discount Model

Fair Value Formulas

Assumptions

Discount Rate

Beta

Risk Free Rate

Equity Risk Premium

Historical Years

Forecast Years

Growth In Perpetuity

Expected Dividend

Fair Value Calculation

Forecast Dividends

Discounted Cash Flow to Firm - Perpetual Growth

Earnings Power Value

Simple Dividend Discount Model

Simple Excess Return Model

Two-Stage Dividend Discount Model

Two-Stage Excess Return Model

Discounted Cash Flow to Firm - Exit Multiple

Discounted Future Market Cap

Peter Lynch Fair Value

Altman Z-Score

Beneish M-Score

Capital Asset Pricing Model (CAPM)

Margin Analysis

Piotroski F-Score

Return on Invested Capital (ROIC)

Shiller PE (CAPE) Ratio

Weighted Average Cost of Capital (WACC)