What is Payout Ratio?

Payout Ratio is sometimes called Dividend Payout Ratio or DPR. It represents the percentage of earnings payed in dividends. It is calculated as follows: DPR = (Annual dividend per share)/(Earning per share).

Lower DPR means that the company retains earnings for development. Higher DPR means that there is no much room for development, and the best use of earnings is to pay dividends. Higher DPR is sometimes associated with more mature companies.

As other ratios DPR should be considered in the context of industry. DPR alone doesn't tell us much about the company.