The dividend payout ratio, or simply the payout ratio, is the percentage of a corporation’s earnings that is paid out in the form of cash dividends.

The calculation of the dividend payout ratio is the cash dividends per share of common stock divided by the earnings per share of common stock.

A fast growing corporation often has a low dividend payout ratio in order to retain and reinvest its earnings in additional income producing assets.

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About the Author: Harold Averkamp (CPA) has worked as an accountant, consultant, and university accounting instructor for more than 25 years.

He is the creator of the AccountingCoach Pro which has been praised for its ability to simplify accounting in a way that anybody can understand.

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