What is a stocks payout ratio?
It’s the annual dividend per share divided by the earnings per share. If the dividend is 40 cents a year and the earnings are $1, the payout ratio is 40 percent. A low payout ratio means the company has room to increase its dividend. A high payout ratio means it does not. A company that pays more in dividends than it earns is a candidate for a dividend cut. Helen Huntley writes about investing and markets for the Times. If you have a question about investments or personal finance, send it to On Money. We’ll try to answer those we think are of greatest reader interest. All questions must be submitted in writing, but readers’ names will not be published. Send questions to huntley@sptimes.com or Helen Huntley, Times, P.O. Box 1121, St. Petersburg, FL 33731.
