Constant Growth Dividend Discount Model (DDM): A Study on Selected Companies in Türkiye
DOI:
https://doi.org/10.2478/rsep-2025-0020Keywords:
DDM, Dividend, Stock, BISTAbstract
This study examines the validity and predictive power of the Constant Growth Dividend Discount Model (DDM) in valuing the stock prices of 23 BIST-listed companies that paid regular dividends between 2014 and 2023. The model estimates theoretical stock values based on the assumption that future dividends grow at a constant rate, and these estimates were compared with actual market prices. To evaluate forecasting accuracy, the symmetric Median Absolute Percentage Error (sMdAPE) and Wilcoxon Signed-Rank test were employed. The findings show that sMdAPE values remained below 30% for the majority of companies, indicating strong predictive accuracy. Although the Wilcoxon test revealed statistically significant differences for 7 firms, no significant discrepancy was found for the remaining 16 firms, suggesting that DDM aligns well with market prices for most dividend-paying firms. Overall, the results demonstrate that DDM is a reliable valuation method for Turkish companies with stable dividend policies. The study also indicates that dividend growth volatility, sectoral characteristics, and macroeconomic dynamics may influence model performance. The findings contribute to the literature and offer practical insights for investors, analysts, and researchers.
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