Payout Ratio

Payout Ratio This is dividend per share divided by earnings per share and the sum multiplied by 100. If the payout ratio is 40% it means that 40% of the company’s profits after tax have been distributed as dividend and 60% transferred to reserves. A very high dividend payout may not be healthy, as it will slow down the building up of an adequate reserve. When a company has more than enough reserves, it can always reward the shareholders by issuing BONUS shares. Also called DIVIDEND COVER

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