Dividend Payout Ratio
The percentage of earnings paid to shareholders as dividends, indicating how much profit is distributed versus reinvested for future growth.
Dividend Payout Ratio
A financial ratio indicating the percentage of earnings paid to shareholders as dividends, calculated by dividing dividends per share by earnings per share.
For instance, if a company earns $4 per share and pays dividends of $1 per share, its dividend payout ratio would be 25%, meaning it distributes a quarter of its earnings to shareholders and retains 75% for reinvestment in the business.
The dividend payout ratio reflects a company’s dividend policy and stage of development. Mature companies in stable industries often have higher payout ratios, while growth companies retain more earnings for expansion. Investors use this ratio to assess dividend sustainability and alignment with their income or growth investment objectives.