Ratio that measures the percentage of net income paid out in dividends. It equals dividends per share divided by earnings per share. Stockholders generally favor companies that distribute a high percentage of their earnings in the form of dividends. Some industries, such as utilities, are known for their stable dividend records. Assume net income is $100,000, cash dividends are $60,000, and common shares outstanding are 10,000. The dividend payout ratio is:
See also Dividend Yield.
