Which of the following is NOT an assumption of the dividend valuation model?

The correct answer is that dividend payments are random and unrelated to profits. This statement contradicts a fundamental principle of the dividend valuation model, which operates under the assumption that dividends are a function of a company's profitability. In this model, dividends are typically seen as a manifestation of a company's earnings, meaning that if a company is profitable, it is likely to distribute dividends to its shareholders.

The other statements relate to critical tenets of the model. The idea that dividends are linked to earnings is a key assumption; higher earnings generally lead to higher dividends. Additionally, the assumption that historical dividend growth is sustainable reflects the model's reliance on the notion that past growth rates can help predict future growth, which is essential for estimating the value of a stock based on expected future dividend payments.

Finally, the assumption that the current share price is always accurate implies that the market has efficiently priced the stock based on all available information, including dividends. In contrast, dividend payments being random and unrelated to profits would undermine the very premise of the dividend valuation model, which focuses on calculated and rational predictions of future dividends based on earnings potential and historical trends.