← Glossary · Financial ratios
Payout ratio
What share of profit is paid out as dividends.
The payout ratio divides dividends by profit. 40 % means the company pays out 40 % of its profit and keeps 60 % for investment or paying down debt.
If the ratio stays above 100 %, the company pays out more than it earns. That only works from reserves or borrowing and is hard to sustain.