Dividend Payout Ratio Calculator

The dividend payout ratio shows what slice of a company's earnings flows back to shareholders as dividends, and this calculator pins that figure down for you. It matters because the ratio speaks directly to whether a dividend can hold up over time and how much profit is left to fund growth, both worth weighing as you choose dividend stocks. A balanced payout suggests a company can keep paying shareholders while still funding operations and expansion.

To find the ratio, divide total dividends paid by net income; the calculator takes the per-share version, dividends per share (DPS) divided by earnings per share (EPS), which gives the same result. Its mirror image, the retention ratio, is simply 1 minus the payout ratio and captures the earnings the company keeps. Suppose a firm earns $100 million in net income and distributes $40 million in dividends: that works out to a payout ratio of 40% and a retention ratio of 60%.

A payout climbing past the 75-80% range can be a warning that the dividend is stretched, particularly where earnings swing year to year. At the other extreme, a very low ratio may mean profits are sitting idle, or that the company is plowing earnings into sizable growth plans that demand heavy reinvestment. Read any payout figure against industry norms and the company's stage of growth before drawing conclusions.