Get the full Excel files, resources, and written versions here: mergersandinquisitions.com/dividend-discount-model/ Table of Contents: 0:00 Introduction 1:16 The Short Answer 7:07 Part 1: Revenue, Expense, and Cash Flow for DT Midstream 10:42 Part 2: Distributable Cash Flow Calculations 13:10 Part 3: Debt, Cash, and Interest Projections 15:11 Part 4: PV of Dividends, Terminal Value, and Implied Value 17:18 Part 5: Merits and Drawbacks of the DDM 19:24 Recap and Summary
Great to see you cover the DDM! Anecdotally seems more prevalent in ER than banking (altho theoretically there's no diff ofc) so its nice to see a change
All this is very interesting and I’ve even read the BIWS guides including this one. Hope i can get into IB to at least have a chance to work on and apply my technical knowledge 😂
Yes, but bank dividend discount models are set up differently (see the separate tutorial here) and require different constraints/assumptions. Also, if the bank is not currently paying dividends, you have to project further out and assume that dividend payments start in the future.
You could potentially base Terminal Value on Dividends in a DDM, but it's more common to use Net Income. The main issue with Dividends is that there is no real "valuation multiple" that corresponds to Dividends, so it's hard to benchmark your assumptions and compare them to other companies, industry standards, and so on. By contrast, it's easy with Net Income because of the P/E multiple. Even something like Book Value is better because of the P/BV multiple (though not applicable to all companies/industries).
Get the full Excel files, resources, and written versions here:
mergersandinquisitions.com/dividend-discount-model/
Table of Contents:
0:00 Introduction
1:16 The Short Answer
7:07 Part 1: Revenue, Expense, and Cash Flow for DT Midstream
10:42 Part 2: Distributable Cash Flow Calculations
13:10 Part 3: Debt, Cash, and Interest Projections
15:11 Part 4: PV of Dividends, Terminal Value, and Implied Value
17:18 Part 5: Merits and Drawbacks of the DDM
19:24 Recap and Summary
Great to see you cover the DDM! Anecdotally seems more prevalent in ER than banking (altho theoretically there's no diff ofc) so its nice to see a change
Thanks! Yes, it's not that common in banking but may be more so in other fields.
Very interesting. Quick question about presenting, you change your curser and paint / highlight certain ranges. How do you do that? Shortcut or how?
Thanks. It's part of the screen capture software (Camtasia Studio).
All this is very interesting and I’ve even read the BIWS guides including this one. Hope i can get into IB to at least have a chance to work on and apply my technical knowledge 😂
Thanks. Good luck!
Hi Brian thanks for the great video. Quick question: what if I am valuing a bank that pays no dividends? Can I still use the DDM?
Yes, but bank dividend discount models are set up differently (see the separate tutorial here) and require different constraints/assumptions. Also, if the bank is not currently paying dividends, you have to project further out and assume that dividend payments start in the future.
Terminal Value is based on NI rather than dividends. Can you please elaborate on the logic behind this?
You could potentially base Terminal Value on Dividends in a DDM, but it's more common to use Net Income. The main issue with Dividends is that there is no real "valuation multiple" that corresponds to Dividends, so it's hard to benchmark your assumptions and compare them to other companies, industry standards, and so on. By contrast, it's easy with Net Income because of the P/E multiple. Even something like Book Value is better because of the P/BV multiple (though not applicable to all companies/industries).