A low DPR means that the company is reinvesting more money back into expanding its business.

Such companies tend to attract income investors who prefer the assurance of a steady stream of income to a high potential for growth in share price. A high DPR means that the company is reinvesting less money back into its business, while paying out relatively more of its earnings in the form of dividends.The two sources of return are related as follows:

When shareholders invest in a company, return on their investment comes from two sources: dividends and capital gains. The dividend payout ratio helps investors determine which companies align best with their investment goals. Δ Interpretation of Dividend Payout Ratio The remaining 75% of net income that is kept by the company for growth is called retained earnings.Įnter your name and email in the form below and download the free template now! Therefore, a 25% dividend payout ratio shows that Company A is paying out 25% of its net income to shareholders. In the same time period, Company A declared and issued $5,000 of dividends to its shareholders. DPR = Dividends per share / Earnings per share Example of the Dividend Payout RatioĬompany A reported a net income of $20,000 for the year. DPR = 1 – Retention ratio (the retention ratio, which measures the percentage of net income that is kept by the company as retained earnings, is the opposite, or inverse, of the dividend payout ratio)ģ. There are several formulas for calculating DPR:Ģ. In other words, the dividend payout ratio measures the percentage of net income that is distributed to shareholders in the form of dividends. The Dividend Payout Ratio (DPR) is the amount of dividends paid to shareholders in relation to the total amount of net income the company generates.

Updated FebruWhat is Dividend Payout Ratio (DPR)?

Nvda dividend payout ratio