The dividend discount model (DDM) is a method of estimating the value of a stock as the present value of all expected future dividend payments.

The DDM model suggests that the value of any asset is the present value of expected future cash flows, discounted at an appropriate rate depending on how risky future cash flows are. Much like any present value calculation, future cash flows are always discounted to account for the time value of money (TVM), which states that a dollar today is worth more than a dollar in the future due to its potential earning capacity.

Intrinsic value is a measure of what an asset is worth. This measure is arrived at by means of an objective calculation or complex financial model, rather than using the currently trading market price of that asset.Some economists think that discounted cash flow (DCF) analysis is the best way to calculate the intrinsic value of a stock. Estimate all of a company's future cash flows. Calculate the present value of each of these future cash flows. Sum up the present values to obtain the intrinsic value of the stock.