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

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## 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?

**First, determine the current price.**Determine the current price of the stock or investment.

**Next, determine the required return on dividends.**Calculate the required return on dividends.

**Next, determine the current annual dividends.**Calculate the annual dividends.

**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.