What is the payday ratio?
One of the factors to be considered when investing in shares is whether the company you invest pay dividend or not. The dividend is when it is part of the company's income back to shareholders depending on how many shares they own. Usually not all incomes are given back, but rather only a percentage of them. This percentage is what the payout ratio consists of. It is also called dividend payout, calculated as an annual dividend paid to the share, divided by profit at the share during the same year.
The payout ratio is written as a percentage. If the payout ratio is 0%, this means that no dividend is paid to shareholders. Many shares do not apply annual dividends, so the ratio 0 is not unusual. 100% Payout ratio means that all incomes of the company are provided to shareholders who are technically the company's owner. A relatively high payout ratio may indicate that in the near future, small or no expansion can be expected from the company.
with VIOWhom the payout ratio is nothing wrong. It can mean nothing more than that a higher yield is obtained from shareholders who invest dividends themselves, rather than a company that invests more of their earnings. In some cases, the payout ratio may exceed 100%. Although it can be a profitable situation for investors in the short term, it is not a sustainable condition.
once, when this high ratio can be seen, is in the environment of economic pessimism or slowing. The company can temporarily increase its dividend and payout ratio to maintain shares attractive - and its price stable - because any other course could prove harmful to the price of shares. Dividend, which remains above 100% of the company's earnings, is generally not considered a good long -term sign for society.
Many financial advisors will advise that the most durable payment ratio is between 40%and 60%. This allows the investor of the SHRGentify a good periodic income from dividends if their shares are considerable. It also means that society meant the importance of continuing growth, and in the near future the future. Most balanced portfolios will contain some supplies paying dividends, both as a way to increase portfolio revenues in the short term, and to help them defeat the inflation in the long run.