Runs entirely in your browser — nothing is sent anywhere. Use the trailing twelve months for both numbers, or the company's full fiscal year; mixing periods is the most common way this ratio gets computed wrong.
The Formula, Plain
Payout ratio = dividends ÷ earnings. Per share it's DPS ÷ EPS; at company level it's total dividends paid ÷ net income — same answer either way when the share count is steady. A company earning $4.00 per share and paying $2.40 has a 60% payout ratio: sixty cents of every earned dollar goes to shareholders, forty are retained to grow the business, pay down debt, or cushion a bad year. The mirror numbers matter as much as the ratio itself — that same company has a 40% retention rate and its earnings cover the dividend 1.67 times.
What's Healthy Depends on the Business
There is no universal good number, and anyone quoting one without context is skipping the hard part. A rough map: under ~60% leaves room for raises and recessions — most long-streak dividend growers live here. 60–80% is normal for mature, steady businesses like utilities and consumer staples, whose cash flows tolerate it. Above 80% means the dividend has little cushion, and above 100% means the company pays out more than it earns — unsustainable unless it's a deliberate bridge across a temporary earnings dip. The trend beats the snapshot: a ratio drifting up year after year because earnings stalled is the classic shape of a future cut, and it's visible long before the announcement.
The Two Traps
Trap one: REITs and MLPs. Depreciation makes their accounting earnings look tiny even when cash pours in, so their EPS-based ratios sit above 100% by design. Judge them on payout against FFO or AFFO instead — same idea, honest denominator. Trap two: negative or near-zero earnings. The ratio explodes or goes negative and stops meaning anything; in that case look at the dividend against free cash flow and the balance sheet instead. This calculator flags both situations rather than pretending the arithmetic still speaks.
Payout ratio is one leg of the stool when judging a dividend — the raise streak and the actual delivered payment record are the others. The payout-ratio explainer goes deeper on the concept, and our plain-English framework walks through all three, and every fund and stock we track has its complete payment history charted so the record part takes thirty seconds to check.
The ratio says whether a dividend is safe; the Dividend Income Calculator says what it pays you — shares × the latest actual payment, for any dividend-paying ticker, free.
Frequently Asked Questions
What's the difference between payout ratio and dividend yield?
Yield compares the dividend to the price — what you earn per dollar invested. Payout ratio compares the dividend to earnings — what the company can afford. A stock can have a modest yield and a dangerous payout ratio at the same time, which is exactly the combination that precedes cuts.
Should I use EPS or free cash flow?
Both, ideally. EPS is the standard denominator and works for most companies; free cash flow catches cases where accounting earnings and actual cash diverge. When the two versions disagree sharply, that disagreement is itself the finding.
Does a low payout ratio mean the dividend will grow?
It means the dividend can grow — capacity, not promise. Whether management actually raises it shows up in the payment record, which is why we chart every payment of every name we track from its first check.