How to Determine Dividend Payout Ratio
When deciding whether to invest in a particular stock, one of the factors an investor may consider is whether that stock pays a dividend, and if it does, what its dividend payout ratio is. The dividend payout ratio measures how much of the company's earnings it pays out in the form of dividends. A high dividend payout ratio means a company passes on most of its earnings in the form of dividends to investors. A lower dividend payout ratio means a company invests most of its earnings within the company, and this often is a sign that a company is growing.
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Instructions
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Find the dividend that was paid on a stock for a particular period. You can do this by looking up the quote of a stock and looking at its "Key Statistics." This section will display past dividend amounts and dates (usually paid quarterly).
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Find the earnings per share of the same company for the same period. This information should be one of the statistics displayed on the main quote page for a stock, but if it is not, it will also be under "Key Statistics."
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Divide the amount of a company's dividend by its earnings per share, and multiply the result by 100. For example, if a stock paid dividends of $3 and had earnings per share of $10, the dividend ratio for that particular stock would be 30 percent.
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