plowback ratio

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.

plowback ratio

See retention rate.

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.

Mentioned in ?

References in periodicals archive ?

The payout ratio is fixed at 0.3, respectively the plowback ratio is fixed at 0.7.

Relative company-valuation methods and lessons of the global financial crisis

SGR represents the sustainable growth rate, calculated as the product of return on equity and plowback ratio. RDS is the intensity of R&D relative to sales.

IPO underpricing, firm quality, and analyst forecasts

For general and limited partners, these bonuses did not represent pure income: General partners had a mandatory plowback ratio of 80 percent while that of limited partners was lower.