A valuation method that determines a stock's intrinsic value by calculating the present value of all expected future dividend payments. The model assumes dividends are the primary source of shareholder returns.
Developed in the 1930s by John Burr Williams in his work 'The Theory of Investment Value,' based on the fundamental principle that an asset's worth equals the sum of its future cash flows. The concept evolved from early dividend-focused investment strategies of the industrial era.
This model suggests that even if you never plan to sell a stock, its value today depends entirely on the cash it will pay you over time! It's like valuing a rental property based on decades of future rent payments, even if the building might crumble eventually.
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