The amount of earnings paid out in dividends to shareholders. Investors can use the payout ratio to determine what companies are doing with their earnings.
Calculated as:
Taobiz explains Payout Ratio
For example, a very low payout ratio indicates that a company is primarily focused on retaining its earnings rather than paying out dividends.
The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends.
