Payout ratio

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Payout ratio

Generally, the proportion of earnings paid out to the common stockholders as dividends. Morespecifically, the firm's cash dividend divided by the firm's earnings in the same reporting period.

Payout Ratio

In fundamental analysis, the opposite of the plowback ratio. That is, the 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 plowback ratio in a slow-growing company and a lower one in a fast-growing company.

payout ratio

The ratio from which the percentage of net income a firm pays to its stockholders in dividends is calculated. Companies paying most of their earnings in dividends have little left for investment to provide for future earnings growth. Stock of firms with high payout ratios appeals primarily to investors seeking high current income and limited capital growth. Also called dividend payout ratio. See also dividend coverage, retained earnings.

Payout ratio.

A payout ratio, expressed as a percentage, is the rate at which a company distributes earnings to its shareholders in the form of dividends.

For example, a company that earns $5 a share and pays out $2 a share has a payout ratio of 2 to 5, or 40%.

A normal range for companies that do pay dividends is 25% to 50% of earnings. But the percentage may vary if a company keeps the amount of its dividend consistent with past dividends regardless of a drop in its earnings.

References in periodicals archive ?
Anil, Kanwal and Sujata Kapoor (2008) in their research paper titled "Determinants of dividend payout ratios--A study of Indian Information Technology sector" published in International Resource Journal of Finance and Economics have tried to identify various factors like profitability , cash flows etc which influence the dividend payout ratio in Information Technology sector in India in the current scenario.
High payout ratios can be just a temporary glitch or a sign of a significant problem.
1) Therefore, if shareholder protection and transparency are keys to higher payouts, payout ratios should increase after cross listing.
Nestle and ITC's payout ratios fell in spite of double- digit profit growth.
Larger firms tended to have higher payout ratios than smaller firms.
Tracy and his team recently scoured the investment landscape in search of companies with dividends yields above 4%, payout ratios equal to or less than 100%, and a history of boosting dividends by an annualized rate of at least +5%.
Firms prefer internal financing to external financing and will adapt their target payout ratios to their investment opportunities.
Finally, Fitch notes that CPT's cash flow payout ratios are high for the 'BBB+' rating category.
In this connection, after analyzing the implications of the TRA on individual and corporate investors, Ben-Horim, Hochman and Palmon |5^ predict that dividend payout ratios should increase in the post-TRA period.
In many cases, the 'right thing' will be to return more cash to shareholders, through dividends, causing payout ratios to rise over the next decade.
Lawrence Payout Ratio Trust is a passively managed portfolio of the 40 Canadian income funds allocated among business and industrial funds, commodity based royalty trusts, real estate investment trusts and pipeline and power generation funds in accordance with specific sector weightings, that have the lowest estimated payout ratios within each such income fund sector, as determined by the manager.
Negative factors include the high level of dividend payout ratios to its parent.