Plowback rate

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Plowback rate

Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved