Executive Summary
Applied a dividend discount framework to evaluate value through distributable cash flows, capital return profile, and long-term required return assumptions.
Objective
To value British American Tobacco using a dividend-based approach appropriate for mature, cash-generative businesses with established capital return policies.
Approach
- —Analysed historical dividend payment and growth patterns
- —Estimated cost of equity using CAPM
- —Applied Gordon Growth Model and multi-stage DDM approaches
- —Assessed sensitivity to growth and discount rate assumptions
Key Outputs
- —Dividend discount model
- —Cost of equity calculation
- —Sensitivity analysis
- —Valuation range assessment
Commercial Insight
Dividend discount models are most appropriate for mature businesses with stable payout policies. The challenge lies in estimating sustainable long-term growth rates for businesses facing structural headwinds.
Tools & Methods
ExcelCAPMDDMFinancial Modelling
Full materials available upon request.
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