Dividend Payout Ratio Formula + Calculator

Meantime, Casey’s continues to take market share by adding new outlets, with plans for 150 in its 2024 fiscal year. Its balance sheet, with just $1.65 billion of long-term debt—a mere 27% of assets and just 16% of its market cap—can backstop that growth and the company’s soaring payout, too. The DPR expresses what percentage of earnings the company paid out to its owners or shareholders. Any money the company doesn’t pay out typically goes to pay down the firm’s debt or reinvest in key operations. The process of forecasting retained earnings for the next four years will require us to multiply the payout ratio assumption by the net income amount in the coinciding period. As a side calculation, we’ll also calculate the retention ratio, which is the retained earnings balance divided by net income.

A better approach is to buy stocks with a lower payout ratio, even if it means sacrificing potential yield to ensure that you own companies that can continue to pay dividends. These companies have more financial flexibility to invest in expanding their earnings, which will enable them to increase their dividends. Then we subtract the amount the company needed for investing in the future (capital expenditures).

  • Keep in mind that average DPRs may vary greatly from one industry to another.
  • The dividend payout ratio shows what proportion of profits is being paid out as dividends.
  • For example, companies in the tech industry tend to have much lower payout ratios than utility companies.
  • In times of economic hardship, people spend less of their incomes on new