Find what share of a company's profit is paid out as dividends and whether that looks sustainable. Enter dividends per share and EPS, or total dividends and net income, to get the payout ratio, retention ratio, dividend coverage and how the ratio would change if earnings fall.
Last updated:
Calculate from
$
Sum of the last 4 quarterly dividends, or the indicated annual rate.
$
Use diluted EPS; GAAP or adjusted, but be consistent.
$
From the cash flow statement (common dividends).
$
Optional extras
$
Per share or total, matching the mode above.
%
For the sustainable growth rate.
$
Adds dividend yield and P/E.
Enter your values to see the result.
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How to use the Dividend Payout Ratio Calculator
Choose per-share or company totals; both give the same ratio.
Enter the annual dividend and earnings: DPS and EPS, or dividends paid and net income.
Optionally add free cash flow, ROE and the share price for the extra ratios.
Read the payout ratio and its band, then check the stress table to see how much earnings could fall before the dividend exceeds profit.
Payout ratio formulas
Payout ratio = dividends ÷ net income × 100 = DPS ÷ EPS × 100
Retention ratio = 1 − payout ratio = (net income − dividends) ÷ net income
Dividend coverage = EPS ÷ DPS (the inverse of the payout ratio)
Link to yield: dividend yield = payout ratio ÷ P/E
Payout ratio bands
Payout ratio
Reading
Typical of
0%
No dividend: all profit reinvested
Young or fast-growing companies
Under 30%
Low, very safe, lots of room to raise
Growth companies, tech, firms starting dividends
30–55%
Moderate and healthy
Mature industrials, banks, healthcare
55–75%
High: fine for stable earnings
Consumer staples, telecoms
75–100%
Very high: little cushion
Utilities; REITs and MLPs (use FFO / DCF instead)
Over 100%
Dividend exceeds earnings
Companies in trouble or after one-off losses
Bands are common rules of thumb, not fixed limits. Compare a company with its own history and with peers in the same industry.
Tips for judging dividend safety
Look at the payout ratio over 5–10 years; a rising trend matters more than one year.
Check both earnings and free-cash-flow payout ratios; big gaps signal non-cash items or heavy spending.
Use the stress table: if a 20–30% fall in earnings pushes the ratio over 100%, the dividend depends on steady profits.
Count special dividends separately; they inflate the ratio for a single year.
Frequently asked questions
How do you calculate the dividend payout ratio?
Payout ratio = dividends ÷ net income × 100, or dividends per share ÷ earnings per share × 100. A company that earns $5.50 per share and pays $2.40 in dividends has a payout ratio of 43.6%.
What is a good dividend payout ratio?
For most companies, 30% to 55% is considered healthy: the dividend is well covered and there is profit left to grow the business. Above 75% leaves little cushion, and above 100% means the dividend is larger than earnings. Utilities, REITs and MLPs often run higher by design.
What is the retention ratio?
The retention ratio, or plowback ratio, is the share of earnings a company keeps: 1 − payout ratio. A 40% payout ratio means a 60% retention ratio. Retained earnings fund growth, debt repayment and buybacks.
Why can the payout ratio be over 100%?
If a company pays more in dividends than it earns, the ratio exceeds 100%. It may be temporary, after a one-off charge, or a sign the dividend is funded by debt or savings and could be cut. Check free cash flow and the trend over several years.
Why do REITs have such high payout ratios?
US REITs must distribute at least 90% of taxable income to keep their tax status, and net income is reduced by large depreciation charges. Analysts therefore compare REIT dividends with funds from operations (FFO) instead of net income.
What is the free-cash-flow payout ratio?
It divides dividends by free cash flow (operating cash flow minus capital spending). Because dividends are paid in cash, many investors consider it a better test of safety than the earnings-based ratio, which can be distorted by non-cash items.
How does payout ratio relate to dividend growth?
The sustainable growth rate = ROE × retention ratio. A company with 18% ROE that retains 56% of earnings can grow earnings, and therefore dividends, about 10% a year without raising its payout ratio, issuing shares or adding debt.
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