Dividend Payout Ratio Calculator
Calculate the dividend payout ratio to understand what percentage of a company's earnings are paid out as dividends. This ratio helps assess dividend sustainability and company financial health.
Dividend Payout Ratio
Additional Metrics (Optional)
Payout Ratio Results
Dividend Payout Ratio:
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Retention Ratio:
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Payout Category:
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Dividend Sustainability
Sustainability Level:
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Growth Capacity:
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Risk Assessment:
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Business Insights
Company Strategy:
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Investor Appeal:
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Financial Health:
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Understanding Dividend Payout Ratio
The dividend payout ratio is a financial metric that shows what portion of a company's earnings (net income) are paid out to shareholders as dividends. It provides insights into a company's dividend policy and financial health.
Payout Ratio Formulas
Per Share Basis
- Payout Ratio = Dividends per Share ÷ EPS
- DPS = Annual dividends per share
- EPS = Earnings per share
- Most common calculation method
Total Basis
- Payout Ratio = Total Dividends ÷ Net Income
- Total Dividends = All dividends paid
- Net Income = Company earnings
- Used for company-wide analysis
Payout Ratio Categories
Ratio Ranges
Understanding different payout levels
Low Payout (0-30%)
- Growth-oriented companies
- Retain earnings for expansion
- Technology and biotech firms
- Higher reinvestment potential
Moderate Payout (30-60%)
- Balanced approach
- Stable dividend payments
- Mature companies
- Growth and income balance
High Payout (60-100%)
- Income-focused companies
- Utilities and REITs
- Limited growth opportunities
- Dividend aristocrats
Excessive Payout (>100%)
- Unsustainable dividends
- Using retained earnings or debt
- Potential dividend cuts
- Financial distress signal
Retention Ratio
Formula
- Retention Ratio = 1 - Payout Ratio
- Retention Ratio = Retained Earnings ÷ Net Income
- Shows earnings kept for growth
- Complements payout ratio
Importance
- Measures reinvestment capacity
- Indicates growth potential
- Used in dividend discount models
- Balance between dividends and growth
Industry Variations
| Industry | Typical Payout Ratio | Reason | Examples |
|---|---|---|---|
| Utilities | 60-80% | Stable cash flows, regulated | Duke Energy, Southern Company |
| Consumer Staples | 40-60% | Stable demand, consistent earnings | Procter & Gamble, Coca-Cola |
| Technology | 0-20% | High growth, reinvestment needs | Apple, Amazon |
| Financials | 30-50% | Regulatory requirements, capital needs | JPMorgan, Bank of America |
Dividend Sustainability Analysis
Sustainable Growth
- Consistent earnings coverage
- Stable cash flow generation
- Conservative payout policies
- Dividend aristocrats track record
Warning Signs
- Payout ratio > 100%
- Declining earnings
- Increasing debt levels
- Dividend cuts or suspensions
Payout Ratio and Company Strategy
Growth Companies
- Low payout ratios (0-30%)
- Retain earnings for expansion
- Attract growth investors
- Capital appreciation focus
Income Companies
- High payout ratios (60-90%)
- Return cash to shareholders
- Attract income investors
- Stable dividend income
Key Takeaways for Dividend Payout Ratio
- Dividend payout ratio shows what percentage of earnings are paid as dividends
- Formula: Payout Ratio = Dividends per Share ÷ Earnings per Share
- Low ratios (0-30%) indicate growth-oriented companies retaining earnings
- High ratios (60-100%) indicate income-focused companies returning cash to shareholders
- Retention ratio = 1 - payout ratio shows earnings kept for growth
- Payout ratios vary by industry with utilities typically having high ratios
- Ratios above 100% may indicate unsustainable dividends
- Use payout ratio with other metrics to assess dividend sustainability