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When dbot uses a dividend-discount model and how the steps differ from DCF.
This page documents the retired standalone DDM pipeline, kept so reports that ran on it still link here. New analyses run the adaptive pipeline, whose plan step resolves the dividend model for banks and insurers on its own.
For dividend-paying financials like banks and insurers, where free cash flow is hard to pin down, dbot valued the company on the dividends it can pay rather than on free cash flow. The DDM (dividend discount model) pipeline mirrored the DCF pipeline step for step. The research, consensus, and finishing stages were the same. What changed is the valuation engine and the drivers it reasons about.
The steps below are where DDM diverges. The four research steps and analyst consensus work exactly the way they do in DCF.
dbot pulls recent news across the company, earnings, strategy moves, competitors, and the industry, plus searches aimed at your thesis, then sorts it by date and source. This works the same way it does in the DCF pipeline.
dbot reads the latest 10-K, 10-Q, and 8-K filings and answers each framing question with cited evidence from the risk factors, the MD&A, the statements, and guidance, paying extra attention to regulatory capital and the balance sheet.
For each framing question, dbot looks for evidence on both sides and goes after the bear case rather than just confirming the bullish view.
dbot pulls news, filings, and thesis evidence into one brief: an executive summary, the competitive landscape, an answer to each framing question, what it means for the valuation, and what's still unknown.
dbot models the dividend stream across a high-growth phase and a stable phase. It sets the cost of equity, derives growth from ROE and the retention ratio, and pins the stable payout so the model stays internally consistent.
| Cost of equity | The rate dividends are discounted at: risk-free rate plus beta times the equity risk premium. |
|---|---|
| High-growth ROE | Return on equity during the high-growth phase. |
| Retention ratio | The share of earnings reinvested. Growth is ROE times retention. |
| Stable growth | Long-run dividend growth, capped near the risk-free rate. |
| Stable payout | Set so the stable phase stays consistent with its growth and ROE. |
dbot runs the DDM in reverse, nudging return on equity or terminal growth to close the gap between its fair value and the current price. Each pass changes the lever that matters most, and then it tells you the ROE the market price is really assuming.
dbot runs ten scenarios, changing one dividend driver at a time (high-growth ROE, retention, stable growth, beta), then gives you a fair-value range and ranks the drivers by how much they matter.
dbot pulls the sell-side price targets, EPS and revenue estimates, and the mix of buy, hold, and sell ratings, and compares them to its own fair value and assumptions. This works the same way it does in the DCF pipeline.
dbot grabs peer data and works out the multiples that matter for financials: price-to-book, price-to-tangible-book, ROE, and dividend yield. It checks the company's DDM-implied price-to-book against its peers to see whether a premium or discount makes sense given the return on equity.
This is a Professor-Damodaran-style review of the base DDM, and it ends with a clear approve or reject.
dbot pulls everything together (the research, the DDM, the market-implied ROE work, the sensitivity range, the consensus comparison, the comparables, and the critic's verdict) into a tight six-paragraph brief: what the research found, what the valuation says, the assumptions it leans on (cost of equity, ROE, payout), how the pieces fit, where it lands against Damodaran's principles, and the risks worth watching.
dbot makes four valuation charts (a valuation bridge, the dividend projection, a price-to-book versus ROE peer comparison, and a sensitivity heatmap) plus the Damodaran-style tables: the DDM one-pager, story-to-numbers, your estimates versus the market, and the financial foundations.
dbot fills in Damodaran's divginzu dividend-discount spreadsheet with the inputs and results (cost of equity, high-growth ROE and retention, stable growth and payout) so you can download the model and push on it yourself.
dbot writes the long-form, Damodaran-style report. It takes your thesis and framing questions head-on, drops in the charts, links the dividend-discount Excel model, and includes the DDM valuation and peer price-to-book tables and the sensitivity table. No buy or sell calls, and it ends with three things to watch.
Next, read the report in Viewing a report, or grab the files in Downloading PDF, Excel & charts.