The ratio of the company to pay dividends is easily calculated using numbers found at the bottom of their income. The dividend payout ratio is an indicator of cash flow, which shows the percent of the total net profits the company pays in dividends. The dividend payout ratio differs from the ratio of the valuation of the stock dividend yield, which compares the dividend payment(s) to the current price of the stock.
The payout ratio is usually calculated in one of two ways, either on a General basis, in this case, the ratio is calculated by dividing the total amount of dividends paid to the company aggregate net income, or for individual resources, where the formula uses dividends per share divided by earnings per share, or EPS. EPS is net income minus preferred dividends divided by average number of shares outstanding during a certain period of time. One option preferred by some analysts uses diluted net earnings per share, which also factors the share options of the company.
The figures for net profit, earnings per share and diluted earnings per share are at the bottom of the report on profits and losses of the company. The amount of dividend payments, view the ads on the payment of dividends to the company or check its balance sheet, which shows of the outstanding shares and retained earnings.
Total dividends = (net profit + retained earnings at the beginning of the reporting period) – retained earnings at end of the reporting period
The dividend payout ratio is the opposite of the retention rate, which shows the percentage of net income retained in the company after the dividend payment, not a percentage of the net profit paid out in dividends. These two ratios are, in fact, two sides of the same coin, just giving different perspectives of analysis. The investor is interested in growth prospects for the expansion of the company are more likely to pay attention to the retention rate, while the income of the investor is more focused on the analysis of dividends as a rule, use the dividend payout ratio.