Dividend Payout Ratio

Published on August 01, 2020
Dividend Payout Ratio is a type of Profitability Ratio that determines the Dividend paid by a company on each share relative to the Earning Per Share (EPS) of the company. Dividend Payout Ratio shows a company’s policy of dividend and the growth in Equity.
$$Dividend\quad Payout\quad Ratio=$$$$\frac { Dividend\quad per\quad Share }{ Earnings\quad per\quad Share } $$
  • Dividend Per Share is the Dividend declared by the company on each share.
  • And EPS = Net Profit / Total Number of Common Equity

Significance and Interpretation

  • The dividend Payout Ratio is the percentage of earnings that a company distributes among the Shareholders.
  • A higher Dividend Payout Ratio implies that a higher portion of the earning of the company is distributed among the Shareholders, hence a higher Dividend Payout Ratio attracts the investors.


Example 1: 

Given below are few details of M/S XYZ Ltd., use them an calculate the Dividend Payout Ratio for M/S XYZ Ltd.
Particulars Amount (in Rs.)
Equity Share Capital @ Rs 10.00 each 5000000.00
Net Profit 4000000.00
Rate of Dividend 15%


Number of Equity Shares = 5000000 / 10
Earnings Per Share = Net Profit / Number of Shares 
 4000000 / 500000 
Dividend Per Share = 15 % of Rs. 10 
 Rs. 1.5
Dividend Payout Ratio = Dividend Per Share / Earnings Per Share 
 1.5 / 8
Hence, Dividend Payout Ratio = 3/16 or 0.1875 or 18.75%

About me

ramandeep singh

My name is Ramandeep Singh. I authored the Quantitative Aptitude Made Easy book. I have been providing online courses and free study material for RBI Grade B, NABARD Grade A, SEBI Grade A and Specialist Officer exams since 2013.

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