Dividend Payout Ratio

A company’s Dividend Payout Ratio is the amount of dividends it pays relative to net income. Investors seeking income over capital appreciation will be drawn to companies that have high, consistent and sustainable dividend payout ratios. Investors preferring companies to invest net earnings into future growth will potentially consider the opposite, all other things being equal. The ratio is derived by dividing the dividend payout by net income. Dividing dividends per share by earnings per share will calculate a company’s dividend payout ratio per share.