--- title: Dividend Payout Ratio | Formula, Example, Analysis, Conclusion,Calculator description: The dividend payout ratio is the amount of money that a company pays in dividends to its shareholders in comparison to its net income. --- [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo-white.4f6047d4.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo.53b28bee.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) **[Home](https://www.carboncollectiveinvesting.com/) > [Sustainable Investing](https://www.carboncollectiveinvesting.com/sustainable-investing) >** Dividend Payout Ratio # Dividend Payout Ratio ![](https://www.carboncollectiveinvesting.com/hubfs/Brooke%20Tomasetti.png) Written by Brooke Tomasetti | Reviewed by [Subject Matter Experts](https://www.carboncollectiveinvesting.com/subject-matter-experts) Updated on October 1, 2024 Fact Checked Why Trust Carbon Collective? ### Table of Contents The dividend payout ratio (DPR) is the amount of money that a company pays in dividends to its shareholders in comparison to its net income. Because it is a ratio, it is expressed as a percentage. First of all, a “dividend” is an amount of money paid back to investors who own shares of a publicly-traded company. It is not a return on their initial investment, but the income generated from the investment. It is based on the company’s total [net income](https://www.carboncollectiveinvesting.com/sustainable-investing/net-income/), which is its income after cost, expenses, overhead, taxes, etc. If you are running a company, how do you know how much to pay your shareholders? Or, from the shareholders perspective, what do the dividends tell you about the health of a company? This is where the dividend payout ratio comes into play. While just looking at the DPR won’t tell you everything you need to know, it can give you a good indication of how the company handles its growth.  The dividend payout ratio gives shows you what they are paying out in proportion to what they are earning. The results of the DPR, however, are subject to interpretation. The analysis of their DPR percentage can vary depending on the market and industry. Generally, fledgeling companies will have a lower ratio since money not paid out will go towards debt paydown and growth investment.  ## Dividend Payout Ratio Formula ![Screenshot (13)](https://www.carboncollectiveinvesting.com/hs-fs/hubfs/Screenshot%20(13).png?width=362&name=Screenshot%20(13).png) In this equation, the “[dividends per share](https://www.carboncollectiveinvesting.com/sustainable-investing/dividend-per-share/)” is the cash value of the money paid to shareholders for each individual share they hold. The “[earnings per share](https://www.carboncollectiveinvesting.com/sustainable-investing/earnings-per-share/)” is essentially the full potential that each share would receive if all of their net income were evenly distributed. For example, if a company had $1000 in net income with 100 total shares, each shareholder has the potential to receive $10 per share. You can also calculate the dividend payout ratio by dividing the total dividends paid by the net income: ![Screenshot (14)](https://www.carboncollectiveinvesting.com/hs-fs/hubfs/Screenshot%20(14).png?width=311&name=Screenshot%20(14).png) Once you have your ratio, you need to know how to apply it. What does this percentage mean, and how does it affect the company and its shareholders? While different industries will have different standards for dividends, here are some general guidelines.  A DPR of less than 30% to 35% is a safe ratio. Businesses starting out would pay these dividends and, hopefully, will launch from there. While the dividends would be low, this is a good place to start investing if you believe the company has potential. If the ratio is less than 0%, the company would be losing money.    From that point, a DPR of up to about 50% would be very positive. This would mean that the business would be taking half its earnings to pay to shareholders. Conversely, it would be able to put the other half towards debt payoff and growth. A business in this range is probably heading its industry.  Once you go higher than this, things get a little riskier. Beyond that percentage, the company would reduce what they had available to use for growth and moving forward. A company that gives three quarters or more of its net income to shareholders is probably not looking forward to the future of its company. If you reach a point where you are sacrificing progress for dividends, you should quickly re-evaluate the direction your company is taking. Finally, if a business has a DPR of over 100%, they are handing out more than they are taking in. This is a major red flag for shareholders and investors.  ## Dividend Payout Ratio Example Daniel wants to evaluate the health of a restaurant chain he has invested in. The company has distributed $4.73 per share for the last quarter. They have earnings per share amount of $8.97.  Let’s break it down to identify the meaning and value of the different variables in this problem.  - Dividends Per Share: $4.73 - Earnings Per Share: $8.97 We can apply the values to our variables and calculate the dividend payout ratio: ![Screenshot (15)](https://www.carboncollectiveinvesting.com/hs-fs/hubfs/Screenshot%20(15).png?width=322&name=Screenshot%20(15).png) In this case, the restaurant chain’s dividend payout ratio would be 0.5273 or 52.73%.  Based on our understanding of the breakdown for DPR results, we can see that the company is probably doing very well. They are producing sustainable dividends that can keep shareholders happy while still keeping enough cash flow to produce growth.  ## Dividend Payout Ratio Analysis  The dividend payout ratio is a great means to determine whether or not a company has the cash flow to support the dividends they are paying at an ongoing rate. For example, a company will not be able to continually pay dividends that equal the full earnings per share, or 100% DPR.  You may be wondering why a company would choose to pay dividends of over 100%. If a company is not doing well, they will sometimes choose to increase their dividends to keep shareholders happy and distracted. They are hoping that these dividends will keep the investors from selling their shares and pulling out. But there is no way to keep this going over the long term.  Ideally, a company should grow their dividends slowly. They should only distribute money at a rate they feel comfortable offering consistently in the future. If a company’s payout shoots up quickly, they may not be able to sustain it and will likely have to cut dividends later.  Consequently, cutting dividends can cause shareholders to feel uneasy about the future of the company. This can lower the price per share and make the company look bad. On the other hand if the DPR is steadily increasing, the company will be seen as stable and forecasting a better future.  ## Dividend Payout Ratio Conclusion - The dividend payout ratio is the amount of money that a company pays in dividends to its shareholders in comparison to its net income.  - This formula uses requires two variables: dividends per share and earnings per share.  - A dividend payout ratio is industry-specific but is usually healthy between 30 and 50%.  - If the ratio is less than 0% or over 100%, the company is probably losing money.  ## Dividend Payout Ratio Calculator You can use the dividend payout ratio calculator below to get an estimate of how much is being paid to shareholders compared to a company’s earnings by entering the required numbers.   Earnings per Share Dividend per Share Dividend Payout Ratio   ## FAQs ### 1. What is a dividend payout ratio? The dividend payout ratio is the percentage of a company's net income that is paid out to shareholders in the form of dividends. ### 2. How do you calculate the dividend payout ratio? The dividend payout ratio can be calculated by dividing the dividends per share by the earnings per share. ### 3. What is a good dividend payout ratio? A good dividend payout ratio is between 30-50%. If the ratio is lower than 0% or over 100%, the company is losing money. ### 4. What if the dividend payout ratio is negative? If the dividend payout ratio is negative, it means the company is paying out more in dividends than it is making in earnings. This is generally not a good sign for the company's financial health. ### 5. Why is the dividend payout ratio important? The dividend payout ratio is important because it gives investors an idea of how much a company is paying out in dividends compared to its earnings. This information can help investors decide if they want to invest in the company. ### Related Topics - [Sustainable 401(k) Plan](https://www.carboncollective.co/401k) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing/) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Retirement Glossary](https://www.carboncollective.co/sustainable-investing/retirement-planning-glossary) - [Best Retirement Plans](https://www.carboncollective.co/sustainable-investing/the-10-best-retirement-plans) - [Wealth Manager Vs Financial Advisor](https://www.carboncollective.co/sustainable-investing/wealth-manager-vs.-financial-advisor) ![Attend Our Next Webinar](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-webinar.12af7b6e.svg) ### Attend Our Next Webinar Join our next Sustainable Investing 101 webinar, get our favorite DIY options, and walk through how we build our portfolios. [Watch Now](https://www.carboncollective.co/sustainable-investing-webinar-green-retirement-month) ![Get Our Newsletter](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-demo.6ed28722.svg) ### Get Our Newsletter Go a level deeper with us and investigate the potential impacts of climate change on investments like your retirement account. Join Newsletter ![close-typeform](data:image/gif;base64,R0lGODlhEQARAIAAAODn7P///yH5BAEHAAEALAAAAAARABEAAAIqBIKpab3v3EMyVHWtWZluf0za0XFNKDJfCq5i5JpomdUxqKLQVmInqyoAADs=) ![Talk To A Human](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-chat.49d48c5b.svg) ### Talk To A Human Joining a new investment service can be intimidating. We’re here for you. Click below to email us a question or book a quick call. [Ask a Question](https://ask.carboncollective.co/f70pooobq) Topics ## Sustainable Investing Topics View our list of some topics below. See More - Portfolios - [Performance](https://www.carboncollectiveinvesting.com/returns) - About - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - Learn - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - Contact - [Contact us](mailto:hello@carboncollective.co) - [Legal](https://www.carboncollective.co/legal) - [Privacy Policy](https://www.carboncollectiveinvesting.com/hubfs/2022-11%20Carbon%20Collective%20Privacy%20Policy.pdf) - [Back to top](https://www.carboncollectiveinvesting.com/sustainable-investing/dividend-payout-ratio#top-of-page) DISCLAIMERS: Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective"), an SEC-registered investment adviser. A copy of Carbon Collective's current written disclosure statement discussing Carbon Collective’s business operations, services, and fees is available at the SEC’s investment adviser public information website – [www.adviserinfo.sec.gov](https://adviserinfo.sec.gov/firm/summary/310129) or [our legal documents here](https://blog.carboncollective.co/legal-documents/). The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. Carbon Collective does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Carbon Collective’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and Carbon Collective's charges and expenses. Carbon Collective's internet-based advisory services are designed to assist clients in achieving discrete financial goals. They are not intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation and do not incorporate specific investments that clients hold elsewhere. For more details, see our Form CRS, Form ADV Part 2 and other disclosures. Past performance does not guarantee future results, and the likelihood of investment outcomes are hypothetical in nature. Not an offer, solicitation of an offer, or advice to buy or sell securities in jurisdictions where Carbon Collective is not registered. © 2026 Carbon Collective Corporation. All rights reserved. × #### Fact Checked Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. Our team of reviewers are established professionals with years of experience in areas of personal finance and climate. They have contributed to top tier financial publications, such as Reuters, Axios, Ag Funder News, Bloomberg, Marketwatch, Yahoo! Finance, and many others. This team of experts helps Carbon Collective maintain the highest level of accuracy and professionalism possible. × #### Why Trust Carbon Collective Carbon Collective is the first online investment advisor 100% focused on solving climate change. We believe that sustainable investing is not just an important climate solution, but a smart way to invest. We follow ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Much of our research comes from leading organizations in the climate space, such as Project Drawdown and the International Energy Agency (IEA). Our goal is to deliver the most understandable and comprehensive explanations of climate and finance topics. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including MarketWatch, Bloomberg, Axios, TechCrunch, Forbes, NerdWallet, GreenBiz, Reuters, and many others. We strive to empower readers with the most factual and reliable climate finance information possible to help them make informed decisions. } ```json { "@context" : "https://schema.org", "@type" : "Organization", "alternateName" : "Carbon Collective", "contactPoint" : { "@type" : "ContactPoint", "areaServed" : "US", "availableLanguage" : "en", "contactType" : "customer service", "telephone" : "(650) 868-2697" }, "logo" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png", "name" : "Carbon Collective Investing LLC", "sameAs" : [ "https://www.facebook.com/carboncollectiveinvesting/", "https://twitter.com/carbncollective", "https://www.instagram.com/carbon.collective/", "https://www.youtube.com/channel/UC769Y-F-L_B37kyQfdpvyXA", "https://www.linkedin.com/company/carbon-collective/", "https://www.crunchbase.com/organization/carbon-collective", "https://adviserinfo.sec.gov/firm/summary/310129", "https://www.wikidata.org/wiki/Q110243690" ], "url" : "https://www.carboncollective.co/" } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The dividend payout ratio is the percentage of a company's net income that is paid out to shareholders in the form of dividends." }, "name" : "What is a dividend payout ratio?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The dividend payout ratio can be calculated by dividing the dividends per share by the earnings per share." }, "name" : "How do you calculate dividend payout ratio?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "A good dividend payout ratio is between 30-50%. If the ratio is lower than 0% or over 100%, the company is losing money." }, "name" : "What is a good dividend payout ratio?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "If the dividend payout ratio is negative, it means the company is paying out more in dividends than it is making in earnings. This is generally not a good sign for the company's financial health." }, "name" : "What if dividend payout ratio is negative?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The dividend payout ratio is important because it gives investors an idea of how much a company is paying out in dividends compared to its earnings. This information can help investors decide if they want to invest in the company." }, "name" : "Why is the dividend payout ratio important?" } ] } ``` ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "https://20345524.fs1.hubspotusercontent-na1.net/hubfs/20345524/Brooke%20Tomasetti.png", "url" : "https://www.carboncollectiveinvesting.com/sustainable-investing/author/brooke-tomasetti" }, "dateModified" : "2024-10-01", "datePublished" : "2021-03-24", "description" : "The dividend payout ratio is the amount of money that a company pays in dividends to its shareholders in comparison to its net income.", "headline" : "Dividend Payout Ratio | Formula, Example, Analysis, Conclusion,Calculator", "image" : "", "mainEntityOfPage" : { "@id" : "https://www.carboncollectiveinvesting.com/sustainable-investing/dividend-payout-ratio", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png" }, "name" : "Carbon Collective" } } ```