Enter the total amount of dividends and the total amount of net income of a security. The calculator will evaluate and display the dividend payout ratio.

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## Dividend Payout Ratio Formula

The following formula can be used to calculate the dividend ratio of a stock or security.

DR = D / NI

- Where DR is the dividend payout ratio
- D is the total amount of dividends
- NI is the net income

The total amount of dividends refers to the sum of all dividends paid out by a company to its shareholders over a specific period.

Net income refers to the total profit or earnings a company has after deducting all expenses and taxes.

## Dividend Payout Ratio Definition

A dividend Payout Ratio is a metric that reflects the proportion of a company’s earnings distributed to its shareholders in the form of dividends. It is calculated by dividing the total dividends paid out by the net income of the company.

The importance of the Dividend Payout Ratio lies in its ability to indicate how much of the company’s earnings are being returned to shareholders. A high ratio suggests that a significant portion of profits is being distributed, which can attract income-seeking investors and increase shareholder satisfaction.

Conversely, a low ratio may indicate that the company retains more earnings for growth or other purposes. Monitoring the Dividend Payout Ratio can help investors assess the sustainability and consistency of dividend payments, providing insights into the company’s financial health and commitment to rewarding shareholders.

## Dividend Payout Ratio Example

How to calculate the dividend payout ratio?

**First, determine the total dividends.**Calculate the total value of the dividends earned.

**Next determine the net income.**Calculate the net income generated by the underlying business.

**Finally, calculate the dividend payout ratio.**Calculate the ratio using the formula above.

## FAQ

**What is a dividend payout ratio?**

A dividend payout ratio is a measure of the ratio of the dividend payout of a security to the total net income of the underlying company.