The dividend discount model (DDM) is an intrinsic valuation approach that estimates the value of a company's equity as the present value of all future dividends expected to be paid to shareholders, discounted at the cost of equity. It is most applicable for mature, dividend-paying companies with stable payout policies — notably financial institutions, utilities and listed holding companies. The Gordon Growth Model (constant dividend growth DDM) simplifies the calculation to V = D₁ / (ke - g), where D₁ is the next expected dividend, ke the cost of equity and g the sustainable dividend growth rate.

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Example: a Swiss listed utility pays an annual dividend of CHF 3.20 per share, expected to grow at 2.5% per year indefinitely. With a cost of equity of 7.0%, the Gordon Growth Model gives an intrinsic value of CHF 3.20 × (1 + 2.5%) / (7.0% - 2.5%) = CHF 72.9 per share — compared to a market price of CHF 68.0, suggesting the stock is slightly undervalued relative to the model's assumptions.

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Hectelion applies the dividend discount model for listed company benchmarking and financial institution valuation, where dividend capacity is the primary value driver.