Dividend Payout Ratio

Knowledge Center

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

Special Interest Group - Dividend Payout Ratio Special Interest Group (6 members)

Forum - Dividend Payout Ratio   Here you will find interesting and educational discussions. What are the Effects of Interim Dividend? (1 reactions) What are the effects of interim dividend declared on the com...

Best Practices - Dividend Payout Ratio Here you will find the most valuable ideas.

Expert Tips - Dividend Payout Ratio Here you will find high-quality advice from experts.

Resources - Dividend Payout Ratio Here you will find powerpoint presentations, micro-learning videos and further information sources. Financial Statement Analysis | Ratio Analysis Ratio Analysis, Finanical Statement Analysis...   Returns and Dividends Dividend payout ratio...   Dividend Payout Ratio Diagram Dividend Management...   Introduction to the Balance Sheet Initial Understanding of a Balance Sheet, Financial Statement Analysis, Accounting...     News about Dividend Payout         News about Payout Ratio         Videos about Dividend Payout         Videos about Payout Ratio         Presentations about Dividend Payout         Presentations about Payout Ratio         Books about Dividend Payout         Books about Payout Ratio         More about Dividend Payout         More about Payout Ratio

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

Return to Management Hub: Finance & Investing

More Management Methods, Models and Theory