Dividend Ratios: Payout And Retention
the dividend payout ratio and retention ratio measure how much profit a company gives back to shareholders as dividends. when a business earns money, it must decide whether to use all of its earnings for future operations or to pass some of ? to the stock holders through a dividend check. a higher payment ratio means a company is paying out more in dividends. to determine the payout figure, divide the company's annual dividend per share by its profit or net income. the profit amount not paid out to stock holders is called the retained earnings. dividing retained earnings by net income gives you the retention ratio, which gauges how much profit is being put back into the company to maintain or grow its operations. take ama's distillery, for example. the company makes a $20,000 profit for the year and it pays out $5,000 to its investors as dividends. its dividend payout ratio is therefore 25%. this means that ama's distillery retains 75% of its profits and puts $15,000 into the business. this example shows how companies with high retention rates have low dividend payout ratios and vice versa. startups or other growing companies will often retain all or most of their earnings to grow future sales. over the long run, an increase in profit boosts the stock price, giving shareholders a capital gain on their investment. by contrast, income ? investors will often buy into older, more established companies specifically for their dividends. if a firm traditionally supplies steady dividends, an decrease in payouts can sometimes put shareholders ?.
- dividend payout ratio・・・配当性向
- retention ratio・・・内部留保率
- dividend check・・・配当券