Estimating Dividends:Special Cases Constant dividend The firm will pay a constant dividend forever This is like preferred stock The price is computed using the perpetuity formula ■( Constant dividend growth The firm will increase the dividend by a constant percent every period Supernormal growth Dividend growth is not consistent initially,but settles down to constant growth eventually 88 Estimating Dividends: Special Cases n Constant dividend q The firm will pay a constant dividend forever q This is like preferred stock q The price is computed using the perpetuity formula n Constant dividend growth q The firm will increase the dividend by a constant percent every period n Supernormal growth q Dividend growth is not consistent initially, but settles down to constant growth eventually