Payout Ratio
The share of earnings paid out as dividends.
What is Payout Ratio?
Dividends divided by earnings. Above 100% means the company is paying out more than it earns, funded by debt or cash reserves - a common precursor to a dividend cut.
Payout Ratio: a worked example
$2 dividend on $2.50 EPS is an 80% payout ratio, leaving little cushion.
More terms in Valuation & Analysis
Market Capitalization
Share price times shares outstanding - the equity value of a company.
Earnings Per Share (EPS)
Net income attributable to each share of common stock.
Price-to-Earnings (P/E) Ratio
Price per share divided by earnings per share.
Dividend Yield
Annual dividends per share divided by share price.
Book Value
Assets minus liabilities - the accounting value of equity.
Free Cash Flow
Operating cash flow minus capital expenditures.
EBITDA
Earnings before interest, taxes, depreciation, and amortization.
Return on Equity (ROE)
Net income divided by shareholders' equity.