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