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What Is a Dividend Payout Ratio? Definition, Calculation & Importance

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By TheStreet Staff What Is the Dividend Payout Ratio and What Does It Tell You? A company’s dividend payout ratio is the ratio of the dividends paid to shareholders over a given period to the company’s earnings for the same period. In other words, it is the percentage of a company’s net income that it pays out to shareholders as dividends. Earnings that are not paid out as dividends are typically used to finance a company’s ongoing operations (e.g. pay off debt, hire staff, build new plants, repair equipment, etc.), so a company’s dividend payout ratio can be thought of as the ratio of income …

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