I keep making mistakes in DDM trying to determine how many years the expected dividends need to be discounted back especially when there is a period of supernormal growth in dividends preceeded by no dividends and then followed by infinite growth at a constant rate if dividends are expected after 5 years , is this the same as D6 or D5?.the discounting should be done for 5 or 4 years respectively?.. could somebody please provide a tip on how to remember this?.The verbiage used to describe ‘dividends expected after x years/not paid until x years/constant dividend growth rate after 3 years’ etc makes me really feel …well,dyslexic! thanks
draw a time line. and once you apply the DDM (continuous growth) --> say you took D3 to calculate the constant growth phase --> You end up with a P2. Then you have Period1->D1, and on Period 2->D2 + P2 try this method on a couple of problems, and you should be able to figure it out