Dividend derivatives contain information about the expectations that investors have of stock dividends. We employ a state space model to estimate a term structure of discounted risk adjusted dividend growth enclosed in dividend derivative prices. A two state model of the term structure capturing short term mean reversion within a year and a medium term component which reverts at business cycle horizon to a long term constant is superior over a model restricted to a single state variable. The dividend term structure extrapolates to an implied price dividend ratio. This model estimate combined with current dividends captures most of the daily return variation of both the Eurostoxx 50 and the Nikkei 225 indices, despite mean reversion to constant long run growth being reasonably quick. Hence, investors update their valuation of dividends beyond the business cycle horizon only to a limited degree.