Finance
Dividend Payout Ratio Calculator
Calculate the dividend payout ratio from per-share figures or company totals. See the retention ratio, sustainability flag, and how the payout compares to industry benchmarks like the REIT 90% rule.
Dividend payout ratio inputs
Negative EPS is allowed and flagged in the result.
Add shares to estimate your annual dividend income.
Payout ratio
25.00%
Moderate payout (mature growth)
- Retention ratio
- 75.00%
- Sustainability flag
- Sustainable
- Annual dividend income
- $120.00
Frequently Asked Questions about the Dividend Payout Ratio Calculator
How do you calculate the dividend payout ratio?
Divide total dividends paid by net income, then multiply by 100. The per-share version is identical: dividend per share (DPS) divided by earnings per share (EPS) times 100. A company that earns $4.80 per share and pays $1.20 in dividends has a 25% payout ratio. The two formulas give the same answer because they cancel the share count.
What is the retention ratio and how does it relate to payout?
Retention ratio is the share of earnings the company keeps to reinvest in the business. It is the complement of the payout ratio: 100% minus payout ratio. A company with a 30% payout ratio retains 70% of earnings for capex, debt repayment, R&D, or buybacks. Retention drives sustainable growth: the higher the retention rate at a given return on equity, the faster book value compounds.
What payout ratio is typical for each industry?
Bands vary sharply by sector. Technology companies average around 20% because they reinvest most cash flow into growth. Industrials run roughly 35%, financials around 30%. Mature consumer staples are near 55%. Utilities sit around 70% because their cash flows are stable and capex is recoverable through regulated rates. Energy averages 50% but swings with commodity cycles. Anything well above the sector norm deserves a second look.
Why are REITs required to pay out at least 90%?
Real estate investment trusts are pass-through entities under IRC sections 856 to 859 of the US tax code. To keep that status and avoid paying corporate tax, a REIT must distribute at least 90% of its taxable income to shareholders each year, and most distribute close to 100% to fully eliminate entity-level tax. That is why REIT payout ratios look extreme compared to operating companies, and why they grow primarily through new property acquisitions funded with debt and equity issuance, not retained earnings.
What happens when a company pays out more than it earns?
A payout ratio above 100% means the dividend exceeds current earnings. The cash has to come from somewhere: drawing down balance-sheet reserves, selling assets, issuing new debt, or issuing new shares. None of those are repeatable for long. Historically, sustained payout ratios above 100% (outside of one-off accounting quirks or special dividends) are a leading indicator of an upcoming dividend cut. The sustainability flag in this calculator turns off whenever the ratio crosses 80%, which is where the warning lights typically start blinking.