i What this calculator does
Quick answer: Value a dividend-paying share with the Gordon growth model, and see how sensitive the answer is to the growth and discount rates. With the default inputs (current dividend per share 8.50, dividend growth rate 6), it returns intrinsic value of R112.62.
The dividend discount model values a share as the present value of its future dividends. In its simplest form, the Gordon growth model, that reduces to next year's dividend divided by the required return less the growth rate.
It works where dividends are the main return and the growth rate is modest and stable, which describes many large South African financial and consumer companies. It breaks entirely where growth approaches the discount rate, and the calculator refuses rather than printing nonsense.
This calculator is for educational purposes only. Results are estimates and may vary depending on market conditions, spreads, commissions, platform settings, and exchange rates. It should not be considered financial advice.
How to use the Dividend Discount Model Calculator
The inputs carry workable values from the start. Nothing has to be entered to get a number on screen.
- 1. Current Dividend Per Share (R)
- 2. Dividend Growth Rate (%)
- 3. Required Return (%) Your cost of equity
- 4. Current Share Price (R)
The result panel reports:
- Cannot value Required return must exceed growth
- Intrinsic Value From these assumptions
- Implied Return at This Price What the market is pricing
Alongside the headline figures, the calculator reports implied return at this price, next year dividend, current yield, required return. Those are the numbers that usually explain why the headline result came out where it did.
Every stage appears beneath the output, so the figure can be audited against your own numbers.
See also: Asset Allocation Calculator.
Common results
What the calculator returns as the current dividend per share changes, with every other input at its default (dividend growth rate 6, required return 14, current share price 142.00).
| Current Dividend Per Share | Intrinsic Value | Current Price | Implied Return At This Price |
|---|---|---|---|
| R2.5 | R33.13 | R142.00 | 7.87% |
| R5 | R66.25 | R142.00 | 9.73% |
| R10 | R132.50 | R142.00 | 13.46% |
| R20 | R265.00 | R142.00 | 20.93% |
| R40 | R530.00 | R142.00 | 35.86% |
| R75 | R993.75 | R142.00 | 61.99% |
Figures used in this calculator
The South African constants this calculator relies on, with the page that holds the current value and the date it was last verified.
- Dividends Tax: 20% withheld for residents. Source: Dividend Withholding Tax by Country (verified 27 September 2026).
- Interest exemption: R23,800 a year under 65. Source: Interest and Dividend Exemptions (verified 29 September 2026).
How the calculation works
There are four inputs to fill in: Current Dividend Per Share, Dividend Growth Rate, Required Return and Current Share Price. Required Return: Your cost of equity. The next dividend is R8.50 x (1 + 6.00%) = R9.01. The spread is 14.00% - 6.00% = 8.00%. The value is R9.01 / 8.00% = R112.62. The vs price is R112.62 against R142.00 = -20.7%. The breakdown also lists current dividend, growth rate, next year dividend and required return.
A worked example in rand
Take the defaults as a worked case: current dividend per share R8.50, dividend growth rate 6%, required return 14% and current share price R142.00. The result is a intrinsic value of R112.62, from these assumptions. Alongside it: current price R142.00 and implied return at this price 12.35%. Change one input, the current dividend per share, to 17, and the intrinsic value moves from R112.62 to R225.25 and the implied return at this price moves from 12.35% to 18.69%. The current price does not change, because it does not depend on that input.
How to read the result
The verdict line under the result says: "The model values the share 21% below the price. The market expects more growth than you have assumed." That sentence is recomputed on every run; it is a reading of the numbers, not a recommendation. A yield is only as good as the payout ratio behind it; above 80% of earnings the dividend has little room for a bad year, whatever the yield. For the reasoning, read Interest and Dividend Exemptions.
The South African angle
The dividend discount model calculator is the same arithmetic anywhere; what differs in South Africa is the environment it runs in. Shares held inside a tax-free savings account receive dividends free of the 20% tax, which is the single largest advantage of the account for an income investor. Dividends Tax in South Africa is withheld at 20% before the cash reaches the shareholder, so a quoted 5% yield is 4% in the hand for a resident individual. Real estate investment trusts on the JSE distribute most of their income as interest rather than dividends, which is taxed as income at the holder's marginal rate rather than at 20%. For the current numbers that sit behind the dividend discount model calculator, see the dividend withholding tax by country table.
Spotted an outdated figure? If a rate, limit or formula in this calculator no longer matches its source, email us the page and the source. A material correction is dated on the Updates Log.
Frequently asked questions
When does the dividend discount model work?
Where dividends are the main form of return, the payout is stable, and growth is modest and predictable. Large banks, insurers and consumer staples fit. Growth companies that pay nothing, and cyclicals whose dividends swing with commodity prices, do not.
Why must the required return exceed growth?
Because the formula divides by the difference between them. If growth equals the required return the denominator is zero and the value is infinite; if growth is higher the value turns negative. Both are arithmetic artefacts rather than valuations.
What growth rate is defensible?
Something at or below the long-run growth of the economy, because a company growing faster than the economy forever would eventually be the economy. For South Africa that anchors the number well below what a single good year might suggest.
What is the implied growth rate?
The growth the current price assumes, given your required return. It is often the most useful output: instead of asking whether your growth estimate is right, you can ask whether the market's is reasonable.
How sensitive is the result?
Very. A one percentage point change in either rate can move the value by twenty percent or more when the spread is narrow. That sensitivity is the model's main weakness and the reason to run it as a range.
Can I use it on an ETF?
In principle, using the fund's distribution and a long-run growth assumption. In practice an index fund's distributions depend on the mix of holdings, so the result is a rough sanity check rather than a valuation.
Want to embed this calculator on your site?
Embed this calculator
Free to use on your own site. Copy the code below and paste it where you want the calculator to appear.
<iframe src="https://www.tradeanswers.co.za/embed/dividend-discount-model-calculator.html"
width="100%" height="750" style="border:0;max-width:520px"
title="Risk Per Trade Calculator - TradeAnswers" loading="lazy"></iframe>
<p><a href="https://www.tradeanswers.co.za/dividend-discount-model-calculator.html">Dividend Discount Model Calculator</a> by <a href="https://www.tradeanswers.co.za/">TradeAnswers</a></p>