As you might know, The value of a stock is the present value of its lifetime cash flows.
For the long term buy and hold investor, the real cash flow from the stock is dividend income over its lifetime.
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Get a cup of Bru coffee.
Today I will help you understand a simple implied growth calculator to find a stock buy level. Let's get started.
(A short thread)
As you might know, The value of a stock is the present value of its lifetime cash flows.
For the long term buy and hold investor, the real cash flow from the stock is dividend income over its lifetime.
In 1959, M J Gordon proposed a formula for this. The formula is
Value = D/(r-g)
Whereas
D = Expected dividends.
r = Required rate of return.
g = Dividend growth rate in perpetuity.
A detailed derivation of the formula is given at the end.
Now, let's be honest, it is next to impossible to predict the growth rate in perpetuity for a firm.
So we twist the formula a little bit. Rather than finding out value, we find the *implied growth rate* This helps us to make deals with Mr. Market.
Here is some math:
Value = D/(r-g)
r-g = D/value
D/value is nothing but dividend yield, so we substitute the same.
r-g = Dividend yield
g = r-Dividend yield
*Implied growth = Required rate of return - Dividend yield*
Since we got implied growth formula, we can use it in some real-life firms.
Let's take Hind Unilever as a case study. The stock is trading at 83 x of FY 20 earnings. A traditional PE investor right away calls it overvalued.
However, taking an r of 10% and a dividend yield of around 1%, the implied growth comes at 9% in perpetuity.
You have to make a bet here. If you think that the firm dividends grow at that rate forever, you buy or else you avoid.
Let's take another example ITC Ltd. Assuming an r of 10% and a dividend yield of 5%, the implied growth comes at 5%.
Whereas the long-term dividend growth rate for ITC Ltd is 13%. So it looks like the stock is undervalued for some reason.
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Fake chats claiming to be from the Irish African community are being disseminated by the far right in order to suggest that violence is imminent from #BLM supporters. This is straight out of the QAnon and Proud Boys playbook. Spread the word. Protest safely. #georgenkencho
There is co-ordination across the far right in Ireland now to stir both left and right in the hopes of creating a race war. Think critically! Fascists see the tragic killing of #georgenkencho, the grief of his community and pending investigation as a flashpoint for action.
Across Telegram, Twitter and Facebook disinformation is being peddled on the back of these tragic events. From false photographs to the tactics ofwhite supremacy, the far right is clumsily trying to drive hate against minority groups and figureheads.
Declan Ganley’s Burkean group and the incel wing of National Party (Gearóid Murphy, Mick O’Keeffe & Co.) as well as all the usuals are concerted in their efforts to demonstrate their white supremacist cred. The quiet parts are today being said out loud.
The best thing you can do is challenge disinformation and report posts where engagement isn’t appropriate. Many of these are blatantly racist posts designed to drive recruitment to NP and other Nationalist groups. By all means protest but stay safe.
There is co-ordination across the far right in Ireland now to stir both left and right in the hopes of creating a race war. Think critically! Fascists see the tragic killing of #georgenkencho, the grief of his community and pending investigation as a flashpoint for action.
Across Telegram, Twitter and Facebook disinformation is being peddled on the back of these tragic events. From false photographs to the tactics ofwhite supremacy, the far right is clumsily trying to drive hate against minority groups and figureheads.
Be aware, the images the #farright are sharing in the hopes of starting a race war, are not of the SPAR employee that was punched. They\u2019re older photos of a Everton fan. Be aware of the information you\u2019re sharing and that it may be false. Always #factcheck #GeorgeNkencho pic.twitter.com/4c9w4CMk5h
— antifa.drone (@antifa_drone) December 31, 2020
Declan Ganley’s Burkean group and the incel wing of National Party (Gearóid Murphy, Mick O’Keeffe & Co.) as well as all the usuals are concerted in their efforts to demonstrate their white supremacist cred. The quiet parts are today being said out loud.
There is a concerted effort in far-right Telegram groups to try and incite violence on street by targetting people for racist online abuse following the killing of George Nkencho
— Mark Malone (@soundmigration) January 1, 2021
This follows on and is part of a misinformation campaign to polarise communities at this time.
The best thing you can do is challenge disinformation and report posts where engagement isn’t appropriate. Many of these are blatantly racist posts designed to drive recruitment to NP and other Nationalist groups. By all means protest but stay safe.
