Dividend payout ratio indicates the portion of profits a company distributes to shareholders as dividends versus retaining earnings for reinvestment. This ratio helps assess whether a company is oriented towards dividend payments or reinvestment for growth. The dividend payout ratio is calculated using the formula:
$$\text{Dividend payout ratio} \mmlToken{mo}[linebreak="auto"]{=} \frac{DPS}{EPS}$$
Where DPS represents dividends per share paid out over the past year.
Dividend Payout Ratio FAQ
What is the dividend payout ratio?
It is the share of earnings a company pays out as dividends.
How do you calculate it?
Divide dividends per share by earnings per share.
