// +------------------------------------------------------------+
//   Model: Simple Dividend Discount Model
//   © Copyright: https://discountingcashflows.com
// +------------------------------------------------------------+

Input(
  {
    _DISCOUNT_RATE: '',
    EXPECTED_DIVIDEND: '',
    _GROWTH_IN_PERPETUITY: '',
    BETA:'',
    _RISK_FREE_RATE: '',
    _MARKET_PREMIUM: '',
    HISTORICAL_YEARS: ''
  },
  [{
    parent:'_DISCOUNT_RATE',
    children:['BETA', '_RISK_FREE_RATE', '_MARKET_PREMIUM']
  }]
);

$.when(
  get_income_statement(),
  get_income_statement_ltm(),
  get_balance_sheet_statement(),
  get_balance_sheet_statement_quarterly('length:2'),
  get_cash_flow_statement(),
  get_cash_flow_statement_ltm(),
  get_profile(),
  get_dividends_annual(),
  get_prices_annual(),
  get_treasury(),
  get_fx(),
  get_risk_premium()).done(
  function($income, $income_ltm, $balance, $balance_quarterly, $flows, $flows_ltm, $profile, $dividends, $prices, $treasury, $fx, $risk_premium){  
  try{
    var response = new Response({
      income: $income,
      income_ltm: $income_ltm,
      balance: $balance,
      balance_quarterly: $balance_quarterly,
      balance_ltm: 'balance_quarterly:0',
      flows: $flows,
      flows_ltm: $flows_ltm,
      profile: $profile,
      treasury: $treasury,
      dividends: $dividends,
      prices: $prices,
      risk_premium: $risk_premium,
    }).toOneCurrency('income', $fx).merge('_ltm');
    response.balance[0]['date'] = response.prices[0]['date'] = 'LTM';
    
    // +---------------- ASSUMPTIONS SECTION -----------------+ 
    // Count the dividends. If there are no dividends, display a warning.
    var dividendsCount = response.dividends.length - 1;
    if(dividendsCount <= 0){
      throwError("The company does not currently pay dividends!");
      return;
    }
    if(dividendsCount > 10){
    	setAssumption('HISTORICAL_YEARS', 10);
    }
    else{
      // Set the default historical years to the number of historical dividends
      setAssumption('HISTORICAL_YEARS', dividendsCount);
    }
    // Set the growth in perpetuity to the 10 year treasury note
    setAssumption('_GROWTH_IN_PERPETUITY', response.treasury.year10);
    
    // Set beta 
    if(response.profile.beta){
    	setAssumption('BETA', response.profile.beta);
    }
    else{
    	setAssumption('BETA', 1);
    }
    // Risk free rate is the yield of the 10 year treasury note
	setAssumption('_RISK_FREE_RATE', response.treasury.year10);
    setAssumption('_MARKET_PREMIUM', response.risk_premium.totalEquityRiskPremium );
    // Discount Rate is the cost of equity
    setAssumption('_DISCOUNT_RATE', toP(getAssumption('_RISK_FREE_RATE') + getAssumption('BETA') * getAssumption('_MARKET_PREMIUM')));
    
    var sensitivity = 0.01;
    var prefDividendsRatio = absolute((response.income[0].eps * response.income[0].weightedAverageShsOut - response.income[0].netIncome) / response.income[0].netIncome);
    var commonIncome = [];
    if( prefDividendsRatio > sensitivity ){
      commonIncome = ['eps:0', '*', 'weightedAverageShsOut:0'];
    }
    else{
      commonIncome = ['netIncome:0'];
    }
    
    // Setup Original Data
    var original_data = new DateValueData({
      'netIncome': new DateValueList(response.income, 'netIncome'),
      'totalStockholdersEquity': new DateValueList(response.balance, 'totalStockholdersEquity'),
      'weightedAverageShsOut': new DateValueList(response.income, 'weightedAverageShsOut'),
      'eps': new DateValueList(response.income, 'eps'),
      'adjDividend': new DateValueList(response.dividends, 'adjDividend'),
      'marketPrice': new DateValueList(response.prices, 'close'),
    });
    var currentDate = original_data.lastDate();
    var nextYear = currentDate + 1;
    var forecastEndDate = currentDate + 5;
    // chartProjectionYears = 5;
    
    // Compute historical values and ratios
    var historical_computed_data = original_data.setFormula({
      'commonIncome': commonIncome,
      'preferredStockDividends': ['netIncome:0', '-', 'commonIncome:0'],
      'dividendsPaidToCommon': ['adjDividend:0', '*', 'weightedAverageShsOut:0'],
      'bookValue': ['totalStockholdersEquity:0', '/', 'weightedAverageShsOut:0'],
      '_returnOnEquity': ['commonIncome:0', '/', 'totalStockholdersEquity:-1'],
      '_payoutRatio': ['adjDividend:0', '/', 'eps:0'],
      'retainedEarnings': ['eps:0', '-', 'adjDividend:0'],
      '_dividendYield': ['adjDividend:0', '/', 'marketPrice:0'],
      '_adjDividendGrowth': ['function:growth_rate', 'adjDividend'],
      'discountedAdjDividend': ['adjDividend:0'],
    }).compute();
    
    // Compute 5 years of forecasted values and ratios
    var forecasted_data = historical_computed_data.removeDate('LTM').setFormula({
      'linearRegression': ['function:linear_regression', 'adjDividend', {slope: 1, start_date: nextYear - getAssumption('HISTORICAL_YEARS')}],
    }).compute({'forecast_end_date': forecastEndDate});
    
    // By default we want the next year's expected dividend to be the average 
    // between the LTM dividend and the regression value of next year
    var linearRegressionWeight = 0.5;
    var expectedDividend = linearRegressionWeight * forecasted_data.get('linearRegression').valueAtDate(nextYear) + 
        					(1-linearRegressionWeight) * original_data.get('adjDividend').valueAtDate('LTM');
    setAssumption('EXPECTED_DIVIDEND', expectedDividend);
    
    forecasted_data = forecasted_data.setFormula({
      'adjDividend': ['function:compound', getAssumption('EXPECTED_DIVIDEND'), {rate: getAssumption('_GROWTH_IN_PERPETUITY'), start_date: nextYear}],
      '_adjDividendGrowth': ['function:growth_rate', 'adjDividend'],
    }).compute({'forecast_end_date': forecastEndDate});
    // +------------- END OF ASSUMPTIONS SECTION -------------+
    
    // +---------------- MODEL VALUES SECTION ----------------+
    var currency = response.currency;
    // The final value calculated by the Dividend Discount Model
    var valueOfStock = getAssumption('EXPECTED_DIVIDEND') / (getAssumption('_DISCOUNT_RATE') - getAssumption('_GROWTH_IN_PERPETUITY'));
    
    // If we are calculating the value per share for a watch, we can stop right here.
    if(_StopIfWatch(valueOfStock, currency)){
      return;
    }
    _SetEstimatedValue(valueOfStock, currency);
    print(original_data.get('adjDividend').valueAtDate('LTM'), "LTM dividend", '#', currency);
    print(getAssumption('EXPECTED_DIVIDEND'), "Next year's expected dividend", '#', currency);
    print(getAssumption('_DISCOUNT_RATE'), "Cost of Equity", '%');
    print(getAssumption('_GROWTH_IN_PERPETUITY'), "Expected Growth Rate", '%');
    // +------------- END OF MODEL VALUES SECTION ------------+
    
    // +------------------- CHARTS SECTION -------------------+
    forecasted_data.renderChart({
      start_date: nextYear - getAssumption('HISTORICAL_YEARS'),
      keys: ['adjDividend', 'linearRegression'],
      properties: {
        title: 'Historical and Projected Dividends',
        currency: currency,
        disabled_keys: ['linearRegression'],
      }
    });
	// +---------------- END OF CHARTS SECTION ---------------+ 
    
    // +------------------- TABLES SECTION -------------------+
    
    // Dividend Table
    forecasted_data.renderTable({
      start_date: currentDate,
      keys: ['adjDividend', '_adjDividendGrowth'],
      rows: ['{PerShare} Dividends', '{%} Dividend Growth Rate'],
      properties: {
        'title': 'Projected data',
        'currency': currency,
      },
    });
    
    // Historical Table
    historical_computed_data.renderTable({
      start_date: nextYear - getAssumption('HISTORICAL_YEARS'),
      keys: ['netIncome', 'totalStockholdersEquity', '_returnOnEquity', 'dividendsPaidToCommon',
             '_payoutRatio', 'weightedAverageShsOut', 'marketPrice', 'eps', 'adjDividend', '_adjDividendGrowth', '_dividendYield'],
      rows: ['Net income', 'Equity', '{%} Return on equity', 'Dividends paid', 
             '{%} Payout ratio', 'Shares outstanding', '{PerShare} Reference market price', '{PerShare} EPS',
             '{PerShare} Dividends', '{%} Dividend Growth Rate', '{%} Dividend yield'],
      properties: {
        'title': 'Historical data',
        'currency': currency,
        'number_format': 'M',
        'display_averages': true,
        'column_order': 'descending',
      },
    });
    // +---------------- END OF TABLES SECTION ---------------+
  }
  catch (error) {
    throwError(error);
  }
});

Description(`
	<h5>Simple Dividend Discount Model</h5>
	<p>Used to estimate the value of companies that have reached maturity and pay stable dividends as a significant percentage of their Free Cashflow to Equity with little to no high growth chance.</p>
	<p class='text-center'>Read more: <a href='https://github.com/DiscountingCashFlows/Documentation/blob/main/models-documentation/dividend-discount-models.md#simple-dividend-discount-model-source-code' target='_blank'><i class="fab fa-github"></i> GitHub Documentation</a></p>
`,
  {
    _DISCOUNT_RATE: [
      '{Equation} \\text{Discount Rate} = \\text{Equity Weight} * \\text{Cost of Equity} + \\text{Debt Weight} * \\text{Cost of Debt} * (1 - \\text{Tax Rate})',
      '{Paragraph} Calculated using Weighted Average Cost of Capital (WACC) formula. It represents a firm’s average after-tax cost of capital from all sources, including common stock, preferred stock, bonds, and other forms of debt.',
      '{Link} https://www.investopedia.com/terms/w/wacc.asp',
      
      '{Title} Cost of Equity',
      '{Equation} \\text{Cost of Equity} = \\text{Risk Free Rate} + \\text{Beta} * \\text{Market Premium}',
      '{Paragraph} The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.',
      '{Link} https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20',
      
      '{Title} Cost of Debt',
      '{Equation} \\text{Cost of Debt} = \\frac{\\text{Interest Expense}}{\\text{Total Debt}}',
      '{Paragraph} The cost of debt is the effective rate that a company pays on its debt, such as bonds and loans.',
      '{Link} https://www.investopedia.com/terms/c/costofdebt.asp',
      
      '{Title} Equity & Debt Weights',
      '{Equation} \\text{Debt Weight} = \\frac{\\text{Total Debt}}{\\text{Market Capitalization} + \\text{Total Debt}} = 1 - \\text{Equity Weight}',
      '{Paragraph} The Equity Weight represents the proportion of equity-based financing (Market Capitalization), while the Debt Weight represents the proportion of debt-based financing (Total Debt).',
      
      '{Title} Tax Rate',
      '{Equation} \\text{Tax Rate} = \\frac{\\text{Income Tax Expense}}{\\text{Income Before Tax}}',
      '{Paragraph} The overall tax rate paid by the company on its earned income.',
    ],
    _GROWTH_IN_PERPETUITY: 'The rate at which the company\'s free cash flow is assumed to grow in perpetuity. By default, this is equal to the yield of the U.S. 10 Year Treasury Bond.',
    _OPERATING_CASH_FLOW_MARGIN: [
      '{Equation} \\text{Projected Operating Cash Flow} = \\text{Projected Revenue} * \\text{Operating Cash Flow Margin}',
      'The margin used to project future Operating Cash Flow as a % from future Revenue.',
    ],
    _CAPITAL_EXPENDITURE_MARGIN: [
      '{Equation} \\text{Projected Free Cash Flow} = \\text{Projected Operating Cash Flow} - \\text{Projected Revenue} * \\text{Capital Expedinture Margin}',
      'The margin used to project future Capital Expedinture as a % from future Revenue, which is then used to calculate the Free Cash Flow.',
    ],	
    HISTORICAL_YEARS: 'Number of historical years used to calculate historical averages.',
    REVENUE_REGRESSION_SLOPE: `Future revenues are projected using a linear regression curve of past revenues.
      Set the slope:
      '>1' for a steeper revenue regression curve
      '0' for flat
      '<0' for inverse slope`,
    _RISK_FREE_RATE: 'The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.'+
    ' By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.',
    _MARKET_PREMIUM: 'Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.',
    BETA: 'Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.',
  });

Ticker	Company	Exchange	Currency
-	-	-	-

Ticker	Company
-	-

Login
Sign Up

Interactive Brokers Group (IBKR) NASDAQ

Currency in USD

Volume:

Day's Range:

IBKR Selected Model: Simple Dividend Discount Model

Name	Model	Model Type
	No model selected	-

*Notifications are added from the Watchlist&Notifications page.

Disclaimer: The data contained in this website is not necessarily real-time nor accurate. All derived (stocks, indexes, futures), cryptocurrencies, and Forex prices are not provided by exchanges but rather by our third party API www.financialmodellingprep.com, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore, Discounting Cash Flows Group doesn't bear any responsibility for any trading losses you might incur as a result of using this data. Discounting Cash Flows Group or anyone involved with Discounting Cash Flows Group will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.