Learn / Fundamentals / Valuation / Dividend Payout Ratio
Payout Ratio = Dividends Per Share ÷ EPS
This number tells you how much of the year's profit was paid out as cash dividends. The rest stayed inside the business for reinvestment, debt paydown, or reserves.
01 Feel it first
Drag EPS and dividend per share, or tap a preset. Watch the paid vs retained bar and see when a generous payout turns stretched.
02 Break the intuition
A 9% yield catches the eye. Peel the cards to see what happens when the payout exceeds earnings.
03 Build the formula
Tap the chips. Divide the cash dividend by earnings per share to see what slice of profit went to owners.
A $0.80 dividend on $2.00 of EPS is a 40% payout. Sixty cents of every profit dollar stayed in the business.
04 Sort them out
Yield alone does not tell you if the dividend is safe. Sort each card by whether the payout looks sustainable.
Tap a card, then sort into Sustainable or Stretched.
Tap a card, then tap a bucket.
05 Two flavors
Some companies return cash as buybacks instead of dividends. The payout ratio only counts the dividend slice.
06 The catch
Utilities and telcos often pay out more of earnings. Growth tech usually keeps almost everything to reinvest.
07 Check yourself
08 Where it breaks
A company can report profit while free cash flow falls short. Payout above cash flow is the real stress test.
A 20% dividend payout can hide heavy buybacks. Total cash returned to owners may be much larger.
A single bad quarter can spike payout above 100% even if the run-rate dividend is fine. Look at a full year or average EPS.
A 70% payout is normal for a utility and alarming for a growth software name. Compare inside the same peer group.
Open any ticker for payout ratio, dividend yield, and cash coverage, then screen for income that can survive a bad year.
40% paid, 60% retained. A balanced split between cash today and reinvestment tomorrow.