Payout ratio

Also called: dividend cover

The share of profit paid out to shareholders as dividends.

Formula

Payout ratio = Dividends paid ÷ Net income

Worked example

1. Dividends paid = $600m
2. Net income = $1.5bn
3. $600m ÷ $1.5bn

Result: 40.0%

How to read it

Under 60% usually leaves room to keep paying and growing the dividend. Over 100% means it's paying out more than it earns.

Worked example uses made-up figures for 'Example plc'

See it with real numbers: Any company page → (free account)