Dividend Payout Ratio

The dividend payout ratio indicates the percentage of a company's earnings distributed to shareholders as dividends. Essentially, it shows how much of the profit the company chooses to share with investors versus reinvesting in the business. For example, a 40% payout ratio means the company pays out 40% of its profits as dividends and retains 60% for growth or other uses. This ratio helps investors understand a company's dividend policy and its approach to returning value to shareholders, balancing profit sharing with reinvestment for future growth.