DEFINITION of 'Supernormal Dividend Growth'
A period of time in which the dividends issued on shares of a stock are inceasing at a higher than average rate. The high growth rate of payouts are seen as above normal, thus "supernormal". Because this rate is also expected to be unsustainable, the dividend growth rate should return to normal levels again. Supernormal dividend growth is a projected rate based on an analysis of a company and/or industry, which determines a period of increased earnings and thus potential payouts.
BREAKING DOWN 'Supernormal Dividend Growth'
Stocks of these companies can be valued using a discounted cash flow model. Investors who purchase stocks based on dividend growth should know three general models:
1. Dividend discount model with no growth in dividends.
2. Dividend discount model with constant dividend growth.
3. Dividend discount model with supernormal dividend growth.
Even though "growth" is used, you should think about the change in dividend payments, this will include decreases into you discount models. In this sense, periods of different rates of growth are discounted separately, then combined to get the total value. In these calculations, investors have to determine the required rate of return, the time periods, and rate of growth, all of which are difficult to predict and can drastically change the valuation of the stock.

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Dividend Discount Model  DDM
A procedure for valuing the price of a stock by using predicted ... 
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Understanding the Supernormal Growth Model
The supernormal growth model values a stock thatâ€™s expected to have higher than normal growth in dividend payments for some period in the future. 
Investing
Valuing A Stock With Supernormal Dividend Growth Rates
If these calculations are off, it could drastically change the value of the shares. 
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Digging Into The Dividend Discount Model
The DDM is one of the most foundational of financial theories, but it's only as good as its assumptions. 
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The 3 Biggest Misconceptions of Dividend Stocks
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Why Dividends Matter
Seven words that are music to investors' ears? "The dividend check is in the mail." 
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Using the Dividend Discount Model
The dividend discount model is a way of applying net present value analysis to estimate the future dividends a stock will pay. Those dividends are then discounted back to their present value. ... 
Investing
Microsoft Is Paying Dividends. Is Its Share Price Undervalued Or Overvalued Based On DDM? (MSFT)
How can you use the dividend discount model to estimate the value the common stock of Microsoft? 
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The Risks of Chasing High Dividend Stocks
Dividend stocks offer enticing yields, but a lot can go wrong on the way to collecting that dividend payout. 
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How Dividends Work For Investors
Find out how a company can put its profits directly into your hands. 
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Due Diligence On Dividends
Understanding dividends and how they work will help you become a more informed and successful investor.

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