Fundamental Glossary / Dividend Metrics
Dividend Payout Ratio
The share of earnings paid out as dividends.
Formula
Dividend per share / earnings per share, or total dividends / PAT.
What it means
The payout ratio is the distribution decision. What is not paid out is retained and, if reinvested well, compounds inside the firm.
A payout above 100% means the dividend exceeded this year's earnings. That can be a deliberate return of surplus cash, or a dividend the earnings no longer support.
How to read it
Mature, low-growth firms can pay out a large share. High-return firms that still have places to invest should usually retain more. The right ratio depends on the reinvestment opportunity.
What to watch
A payout that looks modest on reported EPS can be high on free cash flow. Cover the dividend with cash, not only with accounting profit. Also watch a payout that creeps up every year while earnings stall.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.