A range of 0% to 35% is considered a good payout.
A payout in that range is usually observed when a company just initiates a dividend.
Typical characteristics of companies in this range are “value” stocks.
How do you calculate a dividend payout ratio?
The dividend payout ratio can be calculated as the yearly dividend per share divided by the earnings per share, or equivalently, the dividends divided by net income (as shown below).
What is dividend payout ratio with example?
It is the amount of dividends paid to shareholders relative to the total net income of a company. For example, Company X has earnings per share of $1 and pays dividends per share of $0.60, which would give a payout ratio of 60%.
What is a safe payout ratio?
The payout ratio is the percentage of earnings that is paid out in dividends. However, as a long-term investor, you don’t want to get paid so much that the dividend is unsustainable. To ensure that the dividend is safe, look for stocks with a payout ratio of 75% or lower.