The Dividend Payout Ratio is a popular measure of dividend safety. It measures the amount of earnings paid out in dividends to shareholders and is the inverse of the Dividend Cover Ratio. It is calculated as dividends per share divided by earnings per share. It is quoted as a percentage.
The Payout Ratio tells us what proportion of profits the company is paying out as dividends.
If a company has £2m in profits, and pays out £1m in dividends, then the payout ratio is 50%. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio.
However investors seeking capital growth may prefer lower payout ratio if capital gains are taxed at a lower rate. High growth firms in early life generally have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors.
As we define the Dividend from the Cashflow statement, that means that it's a negative cash-flow item so the Dividend Cover is negative and so is the Payout Ratio, so it's important to be aware of this when screening. This is measured on a TTM basis.
| Ticker | Name | Payout Ratio | StockRank™ |
|---|---|---|---|
| LON:AA4 | Amedeo Air Four Plus | -35596.53 | 81 |
| LON:OSEC | Octopus Aim VCT 2 | -1759.15 | 25 |
| LON:FGEN | Foresight Environmental Infrastructure | -1341.38 | 46 |
| LON:MRV | Maven Renovar VCT | -832.19 | 0 |
| LON:CMX | Catalyst Media | -637.16 | 18 |