• The percentage of the company's profits (EPS) paid out in cash dividends to shareholders calculated by dividing the dividends per share the EPS, and multiplying your result by 100: Dividends per Share / EPS * 100.
The remaining EPS not paid in dividends are reinvested in the company. Young, fast-growing companies often have a low payout percentage because they can better use the funds to grow the company. An increasing payout ratio may show that the company is maturing and growing more slowly, so has less need for cash for expansion. If the payout ratio is unusually and overly large (60% or more) the company may be paying out too much dividend. There may be a risk that the dividend will be cut, with a resulting fall in the stock price. Remember that some kinds of companies -- such as utilities -- normally have a high payout ratio. See also: Payout Ratio.
| ||Embedded terms in definition|
| ||Cash dividend|
Dividends per share
| ||Referenced Terms|
| ||Average cost of capital: A firm's required Payout to the bondholders and to the stockholders expressed as a percentage of capital contributed to the firm. Average cost of capital is computed by dividing the total required cost of capital by the total amount of contributed capital.|
| ||Average percent payout: The average of the percentage of a company's profits paid out in dividends to shareholders, typically calculated over the last five years. A high percent Payout can be a danger sign. Recent payout figures higher than 50%, and higher than the average payout, may forewarn of a dividend cut. A dividend cut would likely cause the stock price to fall. Generally, the higher the payout ratio, the lower the expected growth rate for the company's EPS in the future.|
Sometimes, although the dividend payout is more than earnings, the company has strong cash flow and can cover the dividend in the short term. However, a company paying out dividends in excess of earnings on a recurring basis is a risky investment.
| ||Commission run: Is a report generated by a brokerage firm which lists the commission revenue generated by each broker (AE, IE, or RR). It comes it various forms but the usual data include: customer name, customer account number, instrument traded, quantity traded, price traded, trade date, commission generated (gross, net) and sometimes cumulative. These reports can also show Payout rates, payout matrices, draw amounts and other information related to revenue generation.|
| ||Customary payout ratios: A range of Payout ratios that is typical based on an analysis of comparable firms.|
| ||Dividend payout ratio: Percentage of earnings paid out as dividends.Is computed by dividing the dividends paid on common shares by the net income which would be available for common stockholders.A measurement of the percentage amount of net income paid out in dividends rather than retained by the business to help it grow. Recent Payout figures higher than 50% (and higher than the average payout) may forewarn of a dividend cut. This cut may result in the stock price falling. Sometimes, although the dividend payout is more than earnings, the company has strong cash flow and can cover the dividend. However, a company paying out dividends in excess of earnings on a recurring basis is a risky investment.Indicates the percentage of each dollar earned that is distributed to the owners in the form of cash; calculated by dividing the firm's cash dividend per share by its earnings per share.|
| ||Related Terms|
| ||Average percent payout|
Constant payout ratio dividend policy
Customary payout ratios
Dividend payout ratio
Feasible target payout ratios
Full payout lease
Target dividend payout ratio
Target payout ratio