Dividend Growth Rate

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DEFINITION of 'Dividend Growth Rate'

The annualized percentage rate of growth that a particular stock's dividend undergoes over a period of time. The time period included in the analysis can be of any interval desired, and is calculated by using the least squares method, or by simply taking a simple annualized figure over the time period.

BREAKING DOWN 'Dividend Growth Rate'

The dividend growth rate is necessary in order to use the dividend discount model, which is a security pricing model that assumes that a stock's price is determined by the estimated future dividends, discounted by the excess of internal growth over the firm's estimated dividend growth rate.

A history of strong dividend growth could mean that future dividend growth is likely, which can signal long-term profitability for a given company.

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