Payout Ratio

The payout ratio is the percentage of a company's earnings that it returns to shareholders as dividends rather than reinvesting in the business. You'll see this metric when researching dividend stocks—it tells you how much of the profit is actually going into your pocket. A higher ratio means more cash back to you now; a lower ratio means the company is keeping profits to grow. It matters because an extremely high payout ratio (say, 90%+) can signal the company isn't investing enough to stay competitive, while a very low ratio might mean missed income opportunities. For example, if TechCorp earns $100 million and pays $30 million in dividends, its payout ratio is 30%.