Payout ratio (Payout)
The share of profit paid out as dividends rather than retained, from the cash the company filed as paid to its common holders.
It sets how much profit is left to compound inside the business, and how much room there is before a cut.
How it is computed here
Common dividends paid / net income x 100, both from the latest filed fiscal year
Combines more than one basis. See the note. The pipeline prefers the data vendor's published trailing-twelve-month ratio when one exists, and falls back to recomputing from the latest filed fiscal year when it does not. Those two are different measurements: the vendor figure puts twelve months of flow over the most recent quarterly balance sheet. The source trail on each figure names which path produced it. Filed under risk. Neither a high nor a low reading is good on its own, so it is never coloured as one.
No published threshold exists for this figure, so this page prints none. Read it against the company's own history and its peers instead.
When it misleads
- Above 100 percent the dividend is not covered by profit, which cannot continue indefinitely. The figure is shown as measured however high it goes.
- A loss-making year has no payout ratio: a share of a loss paid out is not a ratio, so it reads n/a rather than a negative percentage.
- Cash paid in the year, not dividends declared for it, so a change in payment timing moves the ratio without the dividend changing.
- A low payout is good in a business earning high returns on capital and bad in one that is not.
- REITs are legally required to distribute most of their income, so a high payout is structural rather than a warning.
Reads differently for REITs, regulated utilities: the figure is shown with that caveat attached.
Questions
How is payout ratio calculated?
Common dividends paid / net income x 100, both from the latest filed fiscal year. Combines more than one basis. See the note. The pipeline prefers the data vendor's published trailing-twelve-month ratio when one exists, and falls back to recomputing from the latest filed fiscal year when it does not. Those two are different measurements: the vendor figure puts twelve months of flow over the most recent quarterly balance sheet. The source trail on each figure names which path produced it.
What does payout ratio tell a value investor?
It sets how much profit is left to compound inside the business, and how much room there is before a cut.
When does payout ratio mislead?
Above 100 percent the dividend is not covered by profit, which cannot continue indefinitely. The figure is shown as measured however high it goes. A loss-making year has no payout ratio: a share of a loss paid out is not a ratio, so it reads n/a rather than a negative percentage. Cash paid in the year, not dividends declared for it, so a change in payment timing moves the ratio without the dividend changing. A low payout is good in a business earning high returns on capital and bad in one that is not. REITs are legally required to distribute most of their income, so a high payout is structural rather than a warning.