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summer1108
Jul 1, 2009, 03:39 PM
How do you determine a dividend payout ratio?

ArcSine
Jul 2, 2009, 04:42 AM
That term could mean a couple or three different things, depending on the context. But most commonly it refers to the ratio \frac{p}{n} where

p = total dividends paid out during the period
n = total net profit for that same period

In other words, it's the percentage of the earnings that were paid out to the common shareholders. Note that

(1 - payout ratio) = "plowback rate"; the percentage of the earnings that were reinvested in the company's assets and projects. I mention it because if you're dealing with payout ratio, you'll encounter plowback rate before you turn the page.

Hope that helps a bit,