Enter the annual dividends, the required rate of return by investors, and the current price of a stock to calculate the constant growth rate.

## Constant Growth Rate Formula

The following formula is used to calculate the required constant growth rate.

CR = [ (P*r) - D ] / (P + D)
• Where CR is the constant growth rate %
• P is the current price
• r is the required return rate on dividends
• D is the current annual dividends

## Constant Growth Rate Definition

A constant growth rate is defined as the average rate of return of an investment over a time period required to hit a total growth percentage that an investor is looking for.

## Constant Growth Rate Example

How to calculate a constant growth rate?

1. First, determine the current price.

Determine the current price of the stock or investment.

2. Next, determine the required return on dividends.

Calculate the required return on dividends.

3. Next, determine the current annual dividends.

Calculate the annual dividends.

4. Finally, calculate the constant growth rate.

Calculate the constant growth rate required to hit the required return rate on dividends.

## FAQ

What is a constant growth rate?

The constant growth rate is a return rate on a stock that is required in order to hit a certain growth rate on the dividend.