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The Payout Ratio calculates the percentage of Net Income that is paid to Shareholders as a Dividend. The portion not paid as a Dividend, goes to Shareholders Funds as Retained Earnings.

For Stock Investors focusing on Dividend-paying Stocks, the Payout ratio is a key ratio to monitor. The Payout Ratio is not a Valuation ratio. It is calculated on a “Per Share” basis. The Payout Ratio is calculated by the following formular.

Payout Ratio = DPS / EPS

At the end of the FY, Net Income can be used to pay dividends, the remainder is held in Shareholders Equity under Retained Earnings. Another Ratio for Dividend focused Investors to keep in mind is Operating Cash Flow per Share dividend by Dividend per Share.


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Warren William

Meet the author behind Smartest-Data. Warren William has a career in Finance and Investments extending over 35 years, both on the Buy Side and Sell Side. His most recent roles include, developing Institutional Risk Management Programs for managing Equity and Fixed Income Risk.  Prior to this Warren William work in Alternative Investments, in Investment Management and as a Buy Side Equity Analyst. Warren William brings a wealth of knowledge and expertise to the table, providing in-depth analysis and commentary on the latest trends in the Stock Markets. Contact information: or Telegram +393339034488

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