Dividend Yield & Growth (DDM) mechanism

Model scope

The existing honest label appropriately describes this as a simplified educational model and not a price target or recommendation. Resolve the exact dividend timing (D0 versus D1), yield output convention, and input rate units before release.

• The Gordon growth formula P=D1/(r-g) is standard only when D1 is the dividend expected one period from now. The input named "dividend" is ambiguous: if it is the current or most recently paid dividend D0, the formula must use D1=D0*(1+g).
• The yield formula annual_div/price is correct for current dividend yield, but the specification does not state whether the output is returned as a decimal or formatted as a percentage.

Units and conventions

• Price and dividends use the same currency per share.
• annual_div and dividend are annual per-share amounts.
• growth_rate and required_return are entered as decimal rates, such as 0.03 for 3%, not as whole-number percentages.
• The test vectors treat dividend as D1, the next-period dividend, for the Gordon calculation.
• yield_percent is the decimal yield multiplied by 100; DDM fair value is in currency per share.

Inspectable vector

One of 4 source-bound review vectors:

{
  "inputs": {
    "price": 50,
    "annual_div": 2,
    "dividend": 2,
    "growth_rate": 0.03,
    "required_return": 0.08
  },
  "expected_outputs": {
    "yield_percent": 4,
    "ddm_fair_value": 40
  },
  "working": "Yield = annual_div / price = 2 / 50 = 0.04. Convert to percent: 0.04 * 100 = 4%. Gordon value = D1 / (r - g) = 2 / (0.08 - 0.03) = 2 / 0.05 = 40."
}

Failure boundary

BREAK_CLAIMED · SELF_FLAGGED

The specification provides no stated rejection behavior for r = g or r < g. Literal arithmetic produces an undefined result at r = g and an economically invalid negative value when r < g. The dividend D0-versus-D1 convention is also unspecified, producing different fair values.

Other records

Sources and evidence

These pointers bind the page to evidence. They do not grant authority or collapse verification into deployment.

• VERIFIED_LEDGER.json
• evidence-tranche4/tranche4-results.json
• BOUNDARY_HAZARD_CATALOG.json