11 Comments
Jul 2, 2022Liked by Tiago Dias

Great post. I use a Dividend Discount model based on Return of Equity, Net asset value, Pay out ratio and discount of 7%.

After the 8th year I assume that the payout ratio is 100%. This method because its based on real figures that the company has achieved the result has been pretty reliable.

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Hi Tiago, I recently subscribed to your blog after listening to you on Dividend Talk (great episode btw!) and I am glad I did. This is a great post. I agree with your assessment about DCF models. I have come to the realization that it is better to use DCF as simply one of the tools in my toolbox and tweak it to match my investment goals/outlook for simplicity. There are several cases where using DCF is simply not practical. Indeed, Prof. Damodaran himself has admitted this (written about his comments in book review of "The Little Book of Valuation" https://lifewithdividends.wordpress.com/2022/03/01/the-little-book-of-valuation-book-review/). I think I have settled on doing a combination of several different models (DCF, DDM, P/TBV etc.) to value a business and then use an adequate margin of safety to safeguard against my own stupidity. More importantly, as far as valuation, I have mentally tuned myself to operate in ranges and not a specific number as the later could lead to anchoring bias.

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Spot on! And what about getting info on customer satisfaction reviews to get a better idea how the company is doing?

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