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 ?
With such large share dividend pay outs, it would be strange to see them giving with one hand and taking with the other.
Real Estate Investment Trusts enable firms to spin off their property holdings into the new listed entities to unlock potential value and increase dividend pay outs.
UNITED Utilities will cut 200 jobs over the next three years as part of its drive to maintain high dividend pay outs to shareholders.
79p - one of the highest dividend pay outs in the UK.
The recent tight controls on corporate spending including cuts in dividend pay outs and wage freezes, combined with a recent rise in productivity, have meant an improvement in disposable income for companies.
In addition the company will add a layer of active management to investing by constantly analysing the balance sheets of these companies to evaluate the sustainability and growth potential of their dividend pay outs.
Lloyds has one of the biggest shareholder bases and, prior to the financial crisis, was a popular investment choice because of its healthy dividend pay outs.
Recently, the market trend has been for major companies to deliver large dividend pay outs to shareholders.
Furthermore, REIT dividend payments are governed by law (REIT dividend pay outs must be 90% of GAAP net operating income, which is not the same as real estate net operating income), and in some cases today a portion of the dividend is being paid in stock and not cash.
The company has also received many inquiries about the upcoming scheduled cash and stock dividend pay outs.
The company's historically low consolidated leverage ratios, despite the substantial dividend pay outs in recent years, were more pressured after the first stage of asset acquisition from Abengoa.
In addition, both large-cap companies (market value of more than $500 million) and small-cap companies (market value of less than $500 million) reported the same increase in dividend pay out ratios.