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What is dividend payout ratio?

Dividend Payout ratio, or simply payout ratio, is the percentage of a company’s earnings paid as dividends to the shareholders. It indicates how well the company’s earnings support the dividend payment.

Dividend Payout ratio = Dividend per equity share X 100

Earnings per share (EPS)

E.g.: For FY10, a company had EPS of Rs. 10. It paid dividend of 20% (Rs. 2 per equity share of Rs. 10 each) for the year.

Dividend payout ratio = Rs. 2 X 100

Rs. 10

Dividend payout ratio = 20%

Source: sptulsian.com

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