Dividend payout ratio calculator
This dividend payout ratio calculator shows how much of earnings goes to shareholders. Example: 300,000 of dividends on 1,000,000 of net income is a 30% payout and 70% retained.
Example: Input: Total amounts (dividends and net income) · Dividends paid (total) 300,000 · Net income 1,000,000 → Result: Payout ratio = 30% · Retention ratio = 70%. Source: Wikipedia – Dividend payout ratio. Updated: .
How it is calculated
The dividend payout ratio shows what share of earnings is paid to shareholders as dividends. The remainder stays in the business and is called retention.
Formulas
Payout ratio = dividends ÷ net income. Per share you can use dividend per share ÷ earnings per share, which gives the same result. The retention ratio is 100% minus the payout ratio. Retained earnings can be reinvested, used to pay down debt or added to reserves.
Example
A company earns 1,000,000 and pays out 300,000: 300,000 ÷ 1,000,000 = 30%. The retention ratio is 70%, that is 700,000 kept. Per share the calculation lands in the same place: a dividend of 1.20 on earnings per share of 4.00 = 30%.
- Above 100% means more is paid than was earned during the year.
- With earnings of 0 or less the ratio is not defined.
Frequently asked questions
How do you calculate the dividend payout ratio?
Divide dividends by net income and multiply by 100. For 300,000 and 1,000,000 that is 30%.
What is the retention ratio?
The share of earnings that stays in the company: 100% minus the payout ratio, here 70%.
What payout ratio is normal?
It varies widely. Mature companies often pay out a larger share, growth-oriented ones keep more. There is no fixed benchmark; industry, investment needs and dividend policy decide.
Sources and legal basis
- Wikipedia – Dividend payout ratio
- Wikipedia – Ausschüttungsquote
- Brealey, Myers, Allen: Principles of Corporate Finance – Payout Policy
As of: · Editorial policy
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