• Payout ratio is a financial metric used to express the proportion of earnings that a company pays out to its shareholders in the form of cash dividends.

• It is calculated by dividing the cash dividend paid during the year by the total amount of earnings.

• Growth companies that spot several opportunities to reinvest their earnings generally have a lower payout ratio than mature companies with fewer reinvestment opportunities.

• Some companies might even pay out more than they earn during the year as dividends by plunging into their cash pile or adding more debt to their balance sheet.

Source:TH