Dividend Payout Ratio

Work out the dividend payout ratio to see what share of your company’s profits flows back to investors as cash. This quick metric highlights how much profit is retained for growth versus returned to shareholders.

Enter the cash dividends distributed to shareholders over the reporting period
Use after-tax profit for the same fiscal period as the dividend

Informational only; consult financial advisors for decisions.

Examples

  • $2.4 million in dividends on $6.0 million in net income ⇒ 40% payout ratio
  • $1.5 million paid out from $5 million in earnings ⇒ 30% payout
  • $800k dividends with $1 million profit ⇒ 80% of earnings distributed

FAQ

What does the payout ratio show?

It reveals the proportion of net profit returned to shareholders as dividends rather than being reinvested.

Should I use basic or diluted earnings?

Use the same net income figure that corresponds to your dividend declaration, typically diluted EPS multiplied by outstanding shares.

What if earnings are zero?

The ratio becomes undefined because you cannot divide by zero; most analysts mark this as not meaningful for the period.

Does this include share buybacks?

No, share repurchases are not captured in the payout ratio; add them to dividends to compute the total shareholder yield.

Additional Information

  • A moderate payout ratio (30–60%) suggests a balance between rewarding shareholders and reinvesting in the business.
  • Capital-intensive or high-growth companies often retain more earnings, resulting in a lower payout ratio.
  • A ratio above 100% means dividends exceeded earnings, which may indicate reliance on cash reserves or debt.
  • Compare the current ratio with multi-year averages and industry peers to understand sustainability.

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