The dividend growth model (“DGM”), sometimes called the dividend discount model or discounted cash flow model, is a commonly used tool for estimating the cost of equity capital, particularly in the context of utility rate setting and unitary appraisal. Although the assumption of constant...

One of the prime pieces of evidence supporting the hypothesis that expected stock returns vary over time is that regressions of future returns on dividend-price ratios are highly significant, but future dividend growth is unrelated to the ratio. This paper presents another interpretation of...

A widely replicated result, using U.S. data, is that dividend-price ratios predict future returns, not future dividend growth. As noted by Cochrane (2011) in his Presidential Address to the American Finance Association, this is evidence of stock return predictability contrary to the original...