Dividends represent the return equity investors are getting on their investment in a stock. It is the part profit they have received as owners in a company. The present value of all the dividends that an investor is going to receive in the future for an indefinite period or a set number of years would be the price an investor would be willing to pay for that security. Hence, this makes dividends extremely important to determine the present value of a share.

In many cases, we see that companies don't pay dividends. In such cases, we can use alternative valuation models such as relative valuation, which compares the stock/company with other similar companies and uses ratios such as EV/EBITDA, P/E, P/B, P/S etc. One can also use the discounted cash flow or the free cash flow model to account for the positive market value of a company.

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