H-model: is D0 before or after the final high growth year?

Let’s say we know a company’s dividend is going from $1.00 this past year and growing 10% for the next 3 years, then declining linearly to 2% growth over 8 years. So for the next 3 years, divs are $1.10, $1.21, $1.33 (up 10% a year).

When plugging into the H-model for the period of linear decline, do we use $1.21 or $1.33? Another way to ask it is, does D0 in the formula need to be the dividend right before the final year of high growth (before it begins to linearly decline), or should D0 be $1.33, i.e. it includes that last year of 10% growth and the subsequent year’s growth is actually 9%?

Use $1.33: the dividend at the start of the decline.

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whoaaaa i thought the H-model uses D0 in both parts? From what I understood was the (slow growth) stage is added throughout in the beginning and then a “spread” of sorts based on the gh-gs is added


This would be for a 3-stage model, if I’m not mistaken. Growth phase 1 @ 10% for three years, then linearly declining to a perpetual rate (Stages 2&3 modeled by the H-model). D0 would from the end of the 10% period.

i dont know if reading this question is burnout lol but i thought it would be as gh = 10% gs=2% and use a CF of 8/2 and plug and chug?