Dividend Payout Ratio
Assesses the proportion of net income paid out to shareholders in the form of dividends. It provides insight into how much profit is being returned to shareholders versus being reinvested in the company. A high ratio might indicate generous returns to shareholders, but it might also mean less reinvestment in the business.
(Dividends Paid / Net Income) x 100
If a company has net income of $500,000 and pays out $100,000 in dividends, the Dividend Payout Ratio would be 20%.