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 ?
Since 2007, the average annual dividend payout ratio was 39.
M2 EQUITYBITES-June 24, 2016-Medtronic posts 13% rise in quarterly cash dividend; Reaches 40% payout ratio
Despite the 80% payout ratio from 4Q15 being maintained, resulting in a dividend of RUB 8.
40 per share for an equivalent payout ratio of 75 percent.
The present research has been conducted by us to investigate the Determinants of Dividend Payout ratio in relation to Capital Structure Decisions in Indian Iron and Steel Industry.
According to the company, the increase brings its dividend per share payout ratio to approximately 35% of current fiscal year 2016 estimated adjusted diluted earnings per share and is targeting a dividend per share payout ratio of 40% within the next few years.
The aim of the research study was to explore the effects of Dividend payout ratio on the firm profitability.
Check out a candidate's payout ratio, which reflects the percentage of its earnings paid out in dividends.
The total payout ratio is defined as the sum of the dividend and the repurchase payout ratios.
The average dividend payout ratio has fallen from 39 per cent in 2010- 11 to 25 per cent.
The overall payout ratio for the S&P 500 -- the percentage of profits that get back to shareholders as dividends -- is now at a record low of 29 percent, according to research conducted by the Web site the Motley Fool.
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.