Payout ratio is dividends paid divided by net income. Retention ratio is what is left over.
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A dividend payout ratio calculator divides total dividends paid by net income, showing what share of a company's earnings goes back to shareholders versus what stays in the business.
Divide total dividends paid by net income, then multiply by 100 to get a percentage. Both numbers come from the same reporting period, usually a quarter or a full year. A company that pays 20,000 dollars in dividends against 100,000 dollars in net income has a payout ratio of 20 percent, and a retention ratio of 80 percent, the share of profit it kept to reinvest, pay down debt, or hold as a cushion. Payout ratio and retention ratio always add up to 100 percent, since together they account for everything the company did with its earnings.
These two numbers get mixed up often, but they answer different questions. The payout ratio compares dividends to earnings, telling you what portion of profit a company chooses to distribute. Dividend yield compares the dividend per share to the current stock price, telling you the cash return an investor gets relative to what they paid for the stock today. A stock can have a high payout ratio and a low dividend yield if its share price has climbed a lot, or a low payout ratio and a high yield if the share price has fallen. Neither number replaces the other: payout ratio is about the company's earnings decisions, dividend yield is about the investment's price today.
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