1. What is the Dividend Payout Ratio?

The Dividend Payout Ratio (DPR) measures the percentage of earnings paid out to shareholders as dividends. It indicates how much money a company is returning to shareholders versus reinvesting in growth.

2. How Does the Calculator Work?

The calculator uses the Dividend Payout Ratio formula:

Where:

• \( DPR \) — Dividend Payout Ratio (decimal)
• \( DPS \) — Dividends Per Share (USD)
• \( EPS \) — Earnings Per Share (USD)

Explanation: The ratio shows what portion of earnings is distributed to shareholders. A ratio of 0.5 means 50% of earnings are paid as dividends.

3. Importance of DPR Calculation

Details: DPR helps investors assess a company's dividend sustainability, growth potential, and financial health. High ratios may indicate limited reinvestment or potential dividend cuts.

4. Using the Calculator

Tips: Enter DPS and EPS in USD. EPS must be greater than zero. The result is displayed as a decimal (multiply by 100 for percentage).

5. Frequently Asked Questions (FAQ)

Q1: What is a good Dividend Payout Ratio?
A: It varies by industry. Mature companies often have higher ratios (50-75%), while growth companies may have lower ratios (0-30%).

Q2: Can DPR exceed 1.0?
A: Yes, but this means dividends exceed earnings, which is unsustainable long-term (using cash reserves or debt).

Q3: How does DPR differ from dividend yield?
A: DPR shows dividends relative to earnings, while yield shows dividends relative to stock price.

Q4: Should I prefer high or low DPR stocks?
A: Depends on goals - high DPR for income, low DPR for growth potential (though exceptions exist).

Q5: How often should DPR be calculated?
A: Typically quarterly with earnings reports, but annual calculations show longer-term trends.