Dividends and Valuation Models

CFA Level I Equities
#1

Please assume a 1 dividend and a net income range of (-10) ~ $10.

(1) Can the dividend discount model be used when dividends are constant?

(2) Can the dividend discount model be used when dividends are constant while income varies but stays positive for more than a year (e.g. 2, 3, or 4 years)?

(3) Can the dividend discount model be used when dividends are constant while income varies but is negative for more than a year (e.g. 2, 3, or 4 years)?

#2

I will just make a general statement from what I have read:

You can use Dividend model in any case if the company has a dividend paying history. However, the valuation theory states that the dividend model should be used or will be more logical when Dividends declared are a fair reflection of growth in profitability and earnings of the company.