Dividend Payout Ratio Calculator
The dividend payout ratio is a crucial metric for investors, indicating the proportion of earnings paid out as dividends. A high ratio may suggest that a company is distributing most of its profits, potentially leaving less for reinvestment and growth. Conversely, a low ratio might indicate that the company is retaining earnings to fund expansion or face financial distress.
- Enter the dividends per share and earnings per share.
- Click ‘Calculate’.
- View your results and chart below.
The formula for the dividend payout ratio is:
Dividend Payout Ratio = (Dividends per Share / Earnings per Share) * 100
| Company | Dividends per Share | Earnings per Share | Payout Ratio |
|---|---|---|---|
| Apple | $0.82 | $5.96 | 13.76% |
| Microsoft | $2.08 | $7.77 | 26.81% |
| Coca-Cola | $1.64 | $2.08 | 78.84% |
| Sector | Average Payout Ratio |
|---|---|
| Consumer Staples | 65.2% |
| Utilities | 72.3% |
| Energy | 28.6% |
- Be cautious of high payout ratios, as they may indicate that a company is distributing more than it can afford.
- Consider the industry average payout ratio when evaluating a company’s dividend policy.
- Regularly review and update your calculations, as earnings and dividends can change over time.
What is a good dividend payout ratio?
A ‘good’ payout ratio depends on the company’s industry and growth prospects. Generally, a ratio between 30% and 50% is considered healthy.
Can a company with a high payout ratio still grow?
Yes, but it’s more challenging. A high payout ratio may limit funds available for reinvestment, requiring the company to finance growth through debt or equity issuance.
For more information, see the Investopedia guide and the SEC’s guide to dividend yields.