retention rate

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Retention rate

The percentage of present earnings held back or retained by a corporation, or one minus the dividend payout rate. Also called the retention ratio.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Earnings Retention Ratio

The percentage of a publicly-traded company's post-tax earnings that are not paid in dividends. Most earnings retained are re-invested into the company's operations. Tracking year-on-year earnings retention ratios is important to fundamental analysis to investigate whether a company is increasing or decreasing its rate of re-investment. The earnings retentions ratio is calculated thusly:

Earnings retention ratio = (Net income - dividends) / Net income

For example, a company with a net income of $10 million that pays out $3.5 million in dividends has an earnings retention ratio of (10 million - 3.5 million) / 10 million = 65%. It is also called simply the retention ratio.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

retention rate

The proportion of net income that is not paid in dividends. A firm earning $80 million after taxes and paying dividends of $20 million has a retention rate of $60 million/$80 million, or 75%. A high retention rate makes it more likely a firm's income and dividends will grow in future years. Also called earnings retention ratio, plowback ratio.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Abu Dhabi University (ADU) has witnessed a significant rise in first year retention rates from 89% to 92%, placing it among the top private universities in the UAE for high retention rates.
Revenue is stable with low contract renewal risk, supported by medium- to long-term contracts in concession catering and high retention rates of over 90% in the contract catering business.
The analyst is also positive on WageWorks' "high" customer retention rates and "robust" sales pipeline.
When the national averages for freshman retention rates at public schools sits around 64 percent and private schools hover around 70 percent, there's clearly room for improvement in ensuring students return to campus the following fall.
The impact of false positives on screening retention rates, however, is conflicting across studies.
In this circumstances the Insurance Companies have to work to focus increase retention rates by providing greater degrees of personalized customer service to existing policy holders.
Our research assumed that high retention rates did not necessarily mean better efficacy, and vice versa, an assumption also common in extant studies cited herein.
The report noted that donor and dollar retention rates had consistently averaged below 50% for the past nine years.
Retention rates in property, engineering, and transport insurance branch were the lowest, compared to other insurance branches, reaching 9 percent, 23 percent and 21 percent respectively as a result of reinsuring the bulk of these risks with reinsurers.
The Avalere analysts divided PPACA exchanges into three categories: Those with projected retention rates over 85 percent, those with projected retention rates under 75 percent, and those with projected retention rates from 75 percent to 85 percent.