Dividend Payout Ratio

How much profit is paid out.

A 40% payout ratio The payout ratio shows what portion of profit a company pays as dividends versus keeps to reinvest. It tells you how sustainable the dividend is and how much the company is ploughing back into growth. Payout ratio = Dividend per share ÷ EPS × 100 EPS Rs 50, dividend Rs 20. Payout = 40%. The company keeps 60% to reinvest. Low payout Reinvesting for growth; dividend has room to rise. High payout Returning most profit; less reinvestment, dividend more fragile. Over 100% Paying more than it earns, usually unsustainable. Gauges dividend sustainability Shows reinvestment appetite Pairs with yield Ideal level depends on maturity Lumpy profits distort it Ignores cash-flow reality

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: The Ratios.