What Is a Payout Ratio?

The dividend payout ratio, also known as the dividend payout ratio, refers to the proportion of dividends in net income. It reflects the company's dividend distribution policy and its ability to pay dividends. Used more in the United States. Startups and small companies usually have a lower distribution ratio. A high distribution ratio indicates that the company does not need more capital for reinvestment, and the distribution ratio of utility stocks is high.

Dividend payout ratio

Its calculation formula is:

Dividend payout ratio =

Cash dividend payout ratio = cash dividend or distributed profit ÷ net operating cash flow

Reflecting the relationship between the operating cash flow and cash dividends in the current period, the lower the ratio, the stronger the company's ability to pay cash dividends. The modification of this indicator can better reflect the cash source and reliability of the dividend payment than the traditional dividend payment rate.