Payout Ratio
Also called: dividend payout ratio, distribution ratio
The payout ratio is the share of earnings paid out as dividends, and it's the fastest test of whether a dividend is safe. Below 60% is generally comfortable for a stable business; above 100% means the company is paying out more than it earns and funding the gap from cash or debt. A very high dividend yield paired with a very high payout ratio is usually a warning that the market expects a cut, not a bargain.
Formula
Payout ratio = Dividends per share ÷ Earnings per share
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