Plain-English definitions, reviewed by an independent investor
Payout Ratio
The payout ratio is the share of earnings a company returns as dividends.
The payout ratio is the share of earnings a company returns as dividends.
Payout Ratio = Dividends per Share ÷ EPS × 100%
Why it matters
It shows whether a dividend is comfortably covered or stretched.
Common confusion
A very high ratio leaves little to reinvest and can risk a cut in bad years.
Frequently Asked Questions
What is a safe payout?
Below ~60% is often comfortable; above 80% deserves a closer look.
Low payout good?
It can mean room to grow the dividend or reinvest for growth.