Definition of 'Dividend Payout Ratio'
The percentage of earnings paid to shareholders in dividends.
Calculated as:
Remember:
- A reduction in dividends paid is looked poorly upon by investors, and the stock price usually depreciates as investors seek other dividend-paying stocks.
- A stable dividend payout ratio indicates a solid dividend policy by the company's board of directors.
- A reduction in dividends paid is looked poorly upon by investors, and the stock price usually depreciates as investors seek other dividend-paying stocks.
- A stable dividend payout ratio indicates a solid dividend policy by the company's board of directors.
The payout ratio provides an idea of how well earnings support the dividend payments. More mature companies tend to have a higher payout ratio.
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