Plowback rate

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Plowback rate

Plowback Rate

In fundamental analysis, the opposite of the payout ratio. That is, the plowback rate is a company's earnings after dividends have been paid out, expressed as a percentage. It is expressed mathematically as: 100 - payout ratio percentage. A higher rate 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.
References in periodicals archive ?
Mapa said the rise of reinvestment of earnings amid the decline in the equity component of the FDI indicated that foreign companies that have set up shop in the Philippines remain upbeat about the country's prospects as they plow back profits into existing operations.
They say that corporations breathe through tax loopholes, perhaps in a scale that will plow back profits to improve service but not massive enough that they already choke tax payments to the government.'