Dividend Payout Ratio Calculator
From total dividends and net income, compute the payout ratio — the share of profit paid out as dividends.
Input Data
Results
At a glance:Payout ratio = total dividends / net income x 100% (= DPS/EPS). Example: NI 1,000k, dividends 300k → 30% paid out, 70% retained. High payout (60%+) = mature/stable firms returning cash; low/none = high-growth retaining to expand. Complement is retention ratio (= 1 - payout). WARNING: Near/above 100% is unsustainable (reserves/borrowing); low ratio = little cash return (not necessarily bad); one-off years distort — watch trend; using FCF/operating cash flow as denominator is more conservative. Education, not advice.
Formula
Payout ratio = total dividends / net income × 100%.
Retention ratio = 100% − payout ratio.
$$\text{Dividend Payout Ratio} = \dfrac{\text{Dividends Paid}}{\text{Net Income}} \times 100\%$$How to Use
- Enter total dividends paid in the year.
- Enter the after-tax net income.
- View the payout ratio.
FAQ
Is a high or low payout ratio better?
No absolute answer — it depends on stage and strategy. Mature, slow-growth firms tend to high payout, returning profit; high-growth firms tend to low payout, retaining to expand. For income investors, a stable sustainable mid-high payout is attractive; but near/above 100% warns of sustainability.
What does payout over 100% mean?
It means dividends exceed current net income — paying more than earned, typically by tapping reserves, selling assets or borrowing. Unsustainable. Short-term (to maintain a dividend image or special payout) may be understandable, but persistent >100% often precedes a cut. Investigate the cause.
How is payout related to retention ratio?
They sum to 100%. Payout is the part paid to shareholders; retention (= 1 - payout) is the part kept for reinvestment. Higher retention means more earnings plowed back (theoretically aiding future growth, if invested well); higher payout means more current cash to shareholders. They reflect the trade-off between rewarding shareholders now and growing via reinvestment.
How is payout different from dividend yield?
Both relate to dividends but from different angles. Payout ratio = dividends / net income — the COMPANY view, how much of profit is paid out, about sustainability. Dividend yield = annual DPS / price — the INVESTOR view, the cash return on purchase price, about 'how much I receive'. Example: payout 40% (well-supported, stable) but yield only 2% due to high price; another payout 100% (precarious) but yield 7% due to low price. High yield ≠ good dividend; check payout for sustainability. Use both: yield for return level, payout for whether it holds, plus earnings/cash-flow stability. Pair with the dividend-yield calculator.
How is payout related to retention ratio (again)?
Payout and retention ratio (retention ratio, aka plowback ratio) are two sides summing to 100%. Net profit is used either as dividends (payout) or retained for reinvestment/reserves (retention). So retention = 100% - payout. Example: payout 30% → retention 70%. The levels reflect the trade-off between rewarding shareholders now and investing for future growth. High-payout/low-retention firms (mature utilities, REITs) give high cash return but weaker growth engine; low-payout/high-retention firms (expanding tech, growth) reinvest for potentially higher future returns via price appreciation and later dividends. Retention also links to sustainable growth rate — more retained, more reinvestment, higher potential (if returns are good). Reading payout with retention gives a fuller picture of capital allocation.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.