Plowback Ratio

plowback ratio

See retention rate.

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Plowback Ratio

In fundamental analysis, the opposite of the payout ratio. The plowback ratio is a company's earnings after dividends have been paid out expressed as a percentage. It is expressed mathematically as: 100 - payback ratio percentage. A higher ratio indicates that a company pays less in dividends and thus reinvests more of its earnings into the company. Whether or not this is desirable depends on the rate of growth: investors tend to prefer a lower plowback ratio in a slow-growing company and a higher one in a fast-growing company.