Dividend payout ratio calculator — how much of the profit is paid out

How to use the dividend payout ratio calculator

1. Under Using, choose Company totals or Per-share figures.
2. For totals, enter Total dividends paid and Net income. For per-share, enter Dividend per share and Earnings per share.
3. Read Dividend payout ratio, Retention ratio and Dividend cover. A warning appears if the payout is above 100%.

What it does and when to use it

A dividend is a portion of a company’s profit paid to its shareholders. The payout ratio shows how big that portion is. It helps you judge whether a dividend looks comfortable, stretched or unlikely to last. A company that pays out 40% of its profit has room to keep paying in a bad year; one paying 110% does not.

The ratio also tells you something about the company’s plans. Young, fast-growing firms often keep most of their profit to reinvest, so their payout is low or zero. Mature firms with fewer projects to fund tend to pay out more.

Use it with the dividend yield calculator to judge whether a high yield is backed by profits, and with the P/E ratio calculator to see what you pay for those profits.

How it works

With D as dividends and E as earnings (either company totals or per-share):

• Payout ratio = D ÷ E × 100
• Retention ratio = 100 − payout ratio
• Dividend cover = E ÷ D

Earnings must be above zero; with a loss there is no meaningful payout ratio. If no dividend is paid, the payout is 0%, retention is 100% and cover is shown as a dash.

Worked examples

These figures come from the calculator’s own function.

From company totals. Dividends 400, net income 1,000 (any currency, any unit such as crores or millions). Payout ratio 40%, retention ratio 60%, dividend cover 2.5 ×.

From per-share figures. Dividend per share 3, EPS 12. Payout ratio 25%, retention 75%, cover 4 ×.

Paying more than it earns. Dividend per share 6, EPS 5. Payout ratio 120%, retention −20%, cover 0.83 ×, with the warning that the payout exceeds earnings and the dividend is being funded from reserves or borrowing.

Limits and tips

• Use the same period for dividends and earnings, normally the same financial year.
• Earnings can be lumpy. One-off gains or losses can swing the ratio. A ratio worked out over several years is steadier.
• Cash matters too. Dividends are paid in cash, while net income includes non-cash items. Some analysts also compare dividends with free cash flow.
• Calculated entirely in your browser.