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Explain the mixed growth dividend model? What type of company would this represent and why would...

Explain the mixed growth dividend model? What type of company would this represent and why would investors want to know this?


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Answer #1

Typcailly start-up companies where the growth pattern is quite random initialy might use Mixed Growth Dividend Model. In this dividends have a mixed growth rate pattern. and growth is tyically divided into two or three phases. It is also known as Variable Growth Dividend Discount Model. It has a different rates of growth, firstly an initial high rate of growth, then a transition to slower growth, and lastly, a steady rate of growth.

Since early-stage companies do not have the view of their earnings and hence they might prefer this model. It is important for investors, especially pension funds or income seeking investors who typically want steady dividends.

Let me know in case of any issues. Enjoy learning. Good luck!

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