Can the DDM be used with stock dividends or is it only used with cash dividends?
Stock dividends aren’t worth anything.
So . . . no.
Thanks for your prompt reply. Can you help me with another question please? When using a DDM, what happens to the intrinsic value of a stock when a firm cuts its dividend payout ratio? I know that the market price will drop because this is perceived as bad news, but the effect on the intrinsic value is confusing to me. If the dividend payout ratio decreases, g will increase which increases the intrinsic value. On the other hand, if the dividend payout ratio decreases, dividends will decrease which decreases the intrinsic value. Thus, I don’t understand what will be the overall effect on the intrinsic value. Thanks a lot!