Dividend Payout Ratio Calculator
Compare dividends per share to earnings per share to get the payout ratio, retention ratio and implied sustainable growth.
How it works
Payout ratio = DPS ÷ EPS × 100 · Retention = 100 − payout · Sustainable growth = retention × ROE
The dividend payout ratio is the share of a company’s earnings handed to shareholders as dividends; the rest, the retention ratio, is plowed back into the business. A low payout leaves more capital for growth, while a very high one — especially above 100% — can signal that a dividend is being funded from reserves or debt and may be at risk. Multiplying the retention ratio by return on equity gives the sustainable growth rate: how fast the firm can grow earnings from reinvested profits alone.
Worked example
A company earning $5 per share and paying a $2 dividend has a payout ratio of 2 ÷ 5 = 40%, retaining 60%. If it earns a 15% return on equity, its sustainable growth rate is 0.60 × 15% = 9% a year — the pace it can grow without raising outside capital.
Frequently asked questions
What is a healthy dividend payout ratio?
It varies by maturity and sector: young growth firms may pay nothing, while mature utilities often pay 60–80%. A ratio consistently above 100% is a warning that the dividend exceeds earnings.
What is the retention ratio?
It is the flip side of the payout ratio — the fraction of earnings the company keeps to reinvest. Payout ratio plus retention ratio always equals 100%.
How does payout relate to sustainable growth?
The more a company retains, the more it can reinvest. Sustainable growth equals the retention ratio times return on equity, linking dividend policy directly to how fast earnings can compound.
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Educational estimate, not investment advice.