Dividend payout ratio

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Dividend payout ratio

Percentage of earnings paid out as dividends.

Dividend Payout Ratio

In fundamental analysis, the opposite of the plowback ratio. That is, the dividend payout ratio is a company's dividends paid to shareholders expressed as a percentage of total earnings. A higher ratio indicates that a company pays more in dividends and thus reinvests less of its earnings into the company. Whether or not this is desirable depends on the rate of growth; investors tend to prefer a higher payout ratio in a slow-growing company and a lower one in a fast-growing company.

dividend payout ratio

Dividend payout ratio.

You can calculate a dividend payout ratio by dividing the dividend a company pays per share by the company's earnings per share. The normal range is 25% to 50% of earnings, though the average is higher in some sectors of the economy than in others.

Some analysts think that an unusually high ratio may indicate that a company is in financial trouble but doesn't want to alarm shareholders by reducing its dividend.

References in periodicals archive ?
The apex bank added that banks that meet the minimum Capital Adequacy Ratio (CAR) but have a CRR of 'Above Average' or an NPL ratio of more than 5 percent but less than 10 percent would have a dividend pay-out ratio of not more than 30 percent.
Over the past five years the Trust has made a concerted effort to reduce its dividend pay-out ratio in order to retain more of its internally generated funds.