Investor Glossary-payout ratioInvestor Glossary-payout ratioInvestor Glossary-payout ratioInvestor Glossary-payout ratioInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Payout Ratio

The HTML to link to this page
 

The payout ratio, sometimes called the dividend payout ratio, is the percentage of a company's earnings that it pays out as dividends. If a company has yearly earnings of $10 and pays $2 in dividends, its payout ratio is 2/10, or 20%. Generally, mature companies with few growth opportunities have a high payout ratio, because returning earnings to shareholders represents the best use of profits. A rapidly expanding firm, however, often has a low payout ratio, because it uses the cash instead to invest in businesses with high growth potential. A firm's payout ratio reflects its need to offer investors a satisfactory return on their investment, which comprises both capital appreciation and cash dividends. Investors in expanding firms often enjoy substantial capital appreciation and thus are satisfied even when the payout ratio is zero. Mature firms have fewer expectations of high growth to drive their stock price, thus they satisfy investors with large dividends and a high payout ratio.



Rate this payout ratio definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: dividends payable, limit order, phantom income, deferred tax, wholly-owned subsidiary, cancelled check, LIBOR, 1031 exchange, average price per share, per diem, APR, covered put, irrevocable trust, inflation, labor relations, current ratio, required rate of return, ex-dividend date, stock split, retained earnings, risk management, minority interest, open position, liquidity ratio, command economy, class C shares, ex-dividend, 144a, debt service coverage, diluted share, option premium, balance sheet, margin rate, real GDP, Key Rate Duration, reverse mortgage, FTSE, deferred revenue, FICO score, annual return, stock market close, 401a, EBITDA, implied volatility, 1035 exchange, Zero Cost Collar, quality assurance, VIX, in escrow


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use