Payout ratio

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 ?
The average dividend payout ratio has fallen from 39 per cent in 2010- 11 to 25 per cent.
Out of 100 companies in the BSE 100 index, more than half have seen a fall in their dividend payout ratio , the part of profit paid as dividend to shareholders.
This implies impressive payout ratio of 30% (based on IFRS net income) and offers 3.
8bn in 2015, and also increased the dividend payout ratio.
Steel Partners spokeswoman Masako Matsuoka said the payment of 244 yen would mean that Inaba would bolster its payout ratio -- the percentage of a firm's net profit paid out to shareholders in the form of dividends -- to 100 percent in relation to its projected group net profit of 5.
Commenting on the redemption, Michael Maturo, Reckson's Chief Financial Officer, stated, "The redemption of our remaining outstanding preferred stock with newly issued common equity, will further strengthen our balance sheet, create additional financial flexibility and improve our dividend payout ratio.
Results of this study suggest that the higher the firm's PE, the lower its risk, and the higher the payout ratio.
We want to make sure that our payout ratio stays well above 33%," a company spokesperson said (Payout ratio refers to the percentage of net profit that goes to shareholders).
Maintaining a generous dividend payout ratio is important for First National Lincoln Corporation," President Daigneault went on.
A payout ratio is simply the percentage of net income a company pays out in dividends.
Company voiced guidance for FY11 dividend payout ratio at 60-70% of net income.
For the first quarter 2003, the company's dividend payout ratio on FFO was 68.