Dividend Payout Ratio

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.

 

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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