Dividend Payout Ratio: formula and how to read it

Share of profit paid out; 25–65% is sustainable. Dividends divided by net income over the last twelve months. Scores 100 inside 25–65% and loses 1.5 points per percentage point outside it.

Stock Meadow groups it under Dividends, and shows it in tables as Payout.

Payout ratio = dividends paid ÷ net income over the last twelve months

A company that earned $100 million and paid $40 million in dividends has a payout ratio of 40%. The numbers are made up for illustration.

Neither extreme is ideal. A very low payout leaves little for shareholders, while a very high one leaves little cushion. Stock Meadow scores 100 inside 25–65% and subtracts 1.5 points for every percentage point outside it.

Stock Meadow scores it against a target range of 25.0% to 65.0%: inside the range scores 100, and each unit outside it costs points.

• Blank when earnings are negative, since a payout ratio cannot be measured.
• Temporary dips in profit can push the ratio above 100% for a healthy company.
• Real-estate trusts and some utilities pay out most of their cash by design, so compare them with their own sector.

How Stock Meadow handles gaps. Usually blank when earnings are negative, so a payout ratio can't be measured.

Treat any single metric as one clue, and read the company's financial statements before drawing a conclusion. Stock Meadow's figures are research tools based on reported data, not investment advice.

Fixed-recipe models that score it: Income (dividends).

In Weighted ranking, Z-score composite and Balanced (no weak link), you choose the metrics and weights yourself, so you can include it in a custom score.

Read about every scoring model on the scoring models page.

• Dividend Yield: yearly dividends as a share of the price.
• Dividend Cover by Free Cash Flow: how many times spare cash covers the dividend.
• Dividend Growth Rate (3-Year): how fast the dividend per share has grown each year.

What is a good dividend payout ratio?

Stock Meadow treats 25–65% as a sustainable range and scores payouts outside it lower. Higher payouts leave less cushion if profits fall; very low payouts return little to shareholders.

Is a higher or lower Payout better?

Stock Meadow scores it against a target range of 25.0% to 65.0%: inside the range scores 100, and each unit outside it costs points. That is a ranking convention, so read Payout alongside other measures and compare similar companies.

Why is Payout blank for some stocks?

It is usually blank when earnings are negative, so a payout ratio can't be measured. Stock Meadow leaves the figure blank rather than guessing it.