Dividend Payout Ratio

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Determining whether a company is generating a sufficient level of cash flow. Explanation of Dividend Payout Ratio.

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Dividend Payout Ratio


The Dividend Payout Ratio is a model for Cash Flow Measurement, used by investors to determine whether a company is generating a sufficient level of cash flow to assure a continued stream of dividends to them. It is also a measurement of the amount of current net income, which is paid out in dividends, instead of the amount retained by the business.



Dividend Payout Ratio calculation

The Dividend Payout Ratio Formula (Cash Flow Measurement Formula) is relatively straightforward:

Divide total annual dividend payments by annual Net Income plus Noncash Expenses minus Noncash Sales.


Calculating the Dividend Payout Ratio during one year provides a very unreliable indication only. A better approach is to run a trend line on the ratio during several years to see if a general pattern of decline or increase emerges.


This ratio is useful in projecting the growth of company as well.


 

Retention Ratio

Its inverse, the Retention Ratio (the amount not paid out to shareholders in the form of dividends), can help to predict a company's growth.


Dividend Payout Ratio Forum
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Financial Statement Analysis | Ratio Analysis

This presentation provides insights in Financial statement and ratio analysis, and includes the following sectios:
1. Financial analysis
2. ...
Usage (application): Ratio Analysis, Finanical Statement Analysis
 

Returns and Dividends

Study by Ian D. McManus a.o. concludes that the inclusion of Payout Ratio is an important adjunct to Dividend Yield in explaining Returns; indeed, our...
Usage (application): Dividend payout ratio
 

Dividend Payout Ratio Diagram

Download and edit this 12manage PowerPoint graphic for limited personal, educational and business use. Republishing in intranets, websites, books, ma...
Usage (application): Dividend Management
 

Introduction to the Balance Sheet

This video explains the main terms you need to read a balance sheet

Assets: things a company owns that have value.
- Current Assets: t...
Usage (application): Initial Understanding of a Balance Sheet, Financial Statement Analysis, Accounting
 
 

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Compare with Dividend Payout Ratio:  Cash Flow from Operations  |  Debt to Equity Ratio  |  CFROI  |  Cash Value Added  |  Cash Ratio  |  Economic Value Added


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