Dividend Payout Ratio
The dividend payout ratio is the proportion of earnings available to common stockholders that are paid out as dividends to them. Generally, a new company or a company that is growing will have a low or no dividend payout, because it is retaining earnings in the company to support its growth.
The dividend payout ratio can be calculated either on a per-share basis or on a whole-company basis.
On a per-share basis, the dividend payout ratio is:
| Dividend Payout Ratio = | Annual Dividends Per Common Share |
| Basic Earnings Per Share |
When the dividend payout ratio is calculated on a per-share basis, it can suffer from rounding differences when basic earnings per share is rounded to the nearest cent.
On a whole company basis, the dividend payout ratio is:
| Dividend Payout Ratio = | Total Common Dividends (Annual) |
| Income Available to Common Shareholders |
Income available to common shareholders is net income minus preferred dividends, if the company has preferred stock.