Payout Ratio

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Dictionary Says

Definition of 'Payout Ratio'

The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings.

Calculated as:

 
Payout Ratio
Investopedia Says

Investopedia explains 'Payout Ratio'

For example, a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends.

The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends. 

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