What is Dividend Payout Ratio?
Dividend Payout Ratio
Dividends per Share ÷ Earnings per Share
( or: Total Dividends ÷ Net Income )
The dividend payout ratio how much of its earnings per share the company uses to pay out its dividend. Especially for high-yielding stocks the payout ratio is of high importance as it is often a signal for an unhealthy payout ratio.
Example: Company XYZ earned 2 EUR per share. They pay a dividend of 3 EUR per share. Their payout ratio is 150 %. As a consequence, 1 EUR per share is paid from substance and not from the company's earnings for that year.