Result
Cost of equity
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Gordon Growth Model (Dividend Discount Model): cost of equity = dividend yield + dividend growth rate = (expected dividend ÷ share price × 100%) + growth rate. The logic is simple: an investor earns from the dividends themselves and from their growth over time.
The model only works for companies with stable, predictably growing dividends, and requires the growth rate to be smaller than the cost of equity itself — otherwise the formula loses mathematical meaning. It doesn't fit fast-growing companies with no dividends or unpredictable payouts.
An alternative way to estimate the cost of equity is the CAPM model, which doesn't require a dividend history and instead relies on the risk-free rate, market risk premium and the stock's beta. Use the separate CAPM calculator for that approach.