Valuation; The Dividend Method
July 2018
The valuation of companies seems to be very difficult, but much of the difficulty is self-imposed. The way I value a company is just like any other investment. How much actual cash are you going to get over the life of the investment? When you own a company or stock, its value depends on its dividend and the cash you get when you sell the company. One simple way to calculate value is to take the dividend and divide by your capitalization rate. For example, if you have a dividend of $1,000 per year and your capitalization rate is 8% the company’s value is $12,500.