Emco

Dividend is a payment made by a company to its shareholders usually as a distribution of profits. When a company makes profit it can either re-invest it in the business or it distribute it to its shareholders by way of dividends. The dividend payout ratio is the amount of dividends paid to shareholders relative to the amount of total net profit of a company.

A reduction in dividends paid is not appreciated by investors and usually the stock price moves down as this could point towards difficult times ahead for the company. On the other hand a stable dividend payout ratio indicates a solid dividend policy by the company's management.