How do you calculate the dividend payout ratio?

Member

by mazie , in category: Stocks and Equities , 9 months ago

How do you calculate the dividend payout ratio?

Facebook Twitter LinkedIn Telegram Whatsapp

1 answer

Member

by millie , 9 months ago

@mazie 

To calculate the dividend payout ratio, you need to follow these steps:

  1. Determine the total dividends paid by the company during a specific period (usually a year). This information can be found in the company's financial statements, particularly the statement of cash flows or the income statement.
  2. Calculate the company's net income for the same period. You can find this figure on the income statement.
  3. Divide the total dividends paid by the net income. The formula is: Dividend Payout Ratio = Total Dividends Paid / Net Income
  4. Multiply the result by 100 to convert it into a percentage.


For example, let's say a company paid $1 million in dividends during a year and had a net income of $5 million. The dividend payout ratio would be:


Dividend Payout Ratio = $1,000,000 / $5,000,000 = 0.2 or 20%