About the Dividend Payout Ratio Calculator
This dividend payout ratio calculator shows how much of a company’s profit is paid out to shareholders as dividends and how much is kept to reinvest. Enter dividends and earnings — either per share or as company totals — and it returns the payout ratio, the retention ratio and dividend coverage. Add free cash flow to check whether the dividend is funded by real cash, and return on equity to estimate the sustainable growth rate.
Dividend investors use the payout ratio to judge how safe a dividend is: a ratio well under 100% leaves a cushion if earnings fall, while a ratio above 100% means the company is paying out more than it earns. Analysts also use the retention ratio in the dividend discount model and the sustainable growth formula g = ROE × retention.
Use the same basis for every input — all per-share figures or all company totals for the same period. Typical “healthy” payout levels differ widely by industry: utilities and REITs routinely pay out most of their earnings (REITs report funds from operations rather than net income), while growing technology companies often pay little or nothing.
With the default inputs, the dividend payout ratio is 60%. Change any value above to recalculate instantly.
How to use the dividend payout ratio calculator
- 1Enter annual dividends per share (or total dividends paid).
- 2Enter EPS (or net income) for the same 12-month period.
- 3Optionally enter free cash flow on the same basis to test cash coverage.
- 4Optionally enter return on equity to estimate the sustainable growth rate.
- 5Read the payout ratio and assessment, and compare with peers in the same industry.
Formula and method
The payout ratio divides dividends by earnings for the same period — dividends per share ÷ EPS, or total dividends paid ÷ net income. The retention (plowback) ratio is the share of earnings kept: 1 − payout ratio. Dividend coverage is the inverse of the payout ratio and says how many times earnings could pay the dividend.
Because accounting earnings include non-cash items, the free-cash-flow payout ratio (dividends ÷ operating cash flow minus capital expenditures) is a stricter test of whether the dividend is affordable. The sustainable growth rate, ROE × retention ratio, estimates how fast a company can grow earnings and dividends by reinvesting its retained profits at its current return on equity, without issuing shares or changing leverage. Ratios are not meaningful when earnings are zero or negative.
- Dividends
- Dividends per share or total dividends paid
- Earnings
- EPS or net income for the same period
- ROE
- Return on equity = net income ÷ shareholders’ equity
- g
- Sustainable growth rate
Worked examples
$2.40 dividend on $4.00 EPS
Paying $2.40 from $4.00 of earnings is a 60% payout, leaving 40% ($1.60 a share) retained. Free cash flow of $3.20 covers the dividend with a 75% FCF payout, and 15% ROE × 40% retention suggests about 6% sustainable growth.
Company totals: $1.2B dividends, $1.0B net income
Paying $1.2 billion of dividends from $1.0 billion of profit is a 120% payout, and free cash flow of $900 million covers only 75% of it. The shortfall is being funded from the balance sheet, a warning sign for dividend safety.
Growth company with a token dividend
A $0.50 dividend on $6.25 EPS is an 8% payout. Retaining 92% of earnings at a 22% ROE gives a sustainable growth rate of 20.24%, typical of a company still reinvesting heavily.
Frequently asked questions
What is a good dividend payout ratio?+
For most established companies, a payout ratio between about 30% and 60% is considered healthy — the dividend is well covered and there is room to raise it. Utilities and consumer staples often run 60%–80%. REITs and MLPs must or typically distribute most of their income, so judge them on funds from operations or distributable cash flow instead.
What does a payout ratio over 100% mean?+
It means the company paid more in dividends than it earned in the period. That can be temporary — a one-off charge or a bad year — but if it persists the company is funding dividends with debt, cash reserves or asset sales, and the dividend is at risk of a cut.
What is the retention ratio?+
The retention or plowback ratio is the share of earnings a company keeps instead of paying out: 1 minus the payout ratio. Retained earnings fund growth, debt repayment and buybacks. Multiplying the retention ratio by ROE gives the sustainable growth rate.
Why use the free-cash-flow payout ratio?+
Earnings include non-cash items such as depreciation and can be flattered by accounting choices. Dividends are paid in cash, so dividing them by free cash flow (operating cash flow minus capital spending) shows whether the business actually generates enough cash to pay them.
How is the payout ratio different from dividend yield?+
The payout ratio compares the dividend with the company’s earnings, while dividend yield compares the dividend with the share price. A high yield with a high payout ratio can signal a dividend the market expects to be cut.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.