Dividend payout ratio
What it measures, why the same dividend produces a different ratio on every basis you can divide it by, and what the number actually looks like across 532 companies that filed one.
The formula, and the argument inside it
A payout ratio is dividends divided by whatever funded them, as a percentage. The formula is arithmetic and nobody disagrees about it. The denominator is the whole argument.
Screeners almost always divide by GAAP earnings, and print the result as the payout ratio. Earnings are an accounting measure: they carry depreciation on assets bought years ago and exclude the cash spent on assets bought this year. A dividend is paid in cash. Where those two diverge — a capital intensive year, a large non-cash charge, a working-capital swing — the earnings ratio and the cash ratio describe different companies.
3M is the clean illustration: it paid 48.7% of GAAP earnings and 111.9% of free cash flow in the same fiscal year. Both figures are correct. Only one of them is about whether the cash was there. See the working →
What the number actually looks like
Every payout ratio published on this site, grouped by the measure it divides by. The middle column is the median; half of the companies measured on that basis sit between the two figures either side of it.
| Basis | Companies | 25th pct | Median | 75th pct |
|---|---|---|---|---|
| GAAP earnings | 476 | 27.0% | 44.0% | 72.3% |
| Operating cash flow | 501 | 14.7% | 26.0% | 45.4% |
| Free cash flow | 406 | 21.3% | 39.6% | 73.0% |
| Funds from operations | 46 | 54.2% | 65.5% | 78.3% |
| Net investment income | 4 | 95.4% | 96.5% | 96.5% |
Read down the median column rather than across a row. The same company appears on several rows, and the bases are not measuring the same thing — that is the point. A company with no ratio on a basis is not counted there: where the measure itself was negative, its page prints negative and no percentage, because a ratio against a negative denominator is not one. 15 of the 573 companies here report no computable ratio on any basis.
What counts as good, by sector
This is the question the phrase “a good payout ratio” is usually asked about, and it does not have a single answer. Each row below is the median payout for that sector on the basis that applies to each company in it — funds from operations for a REIT, free cash flow for most industrials.
| Sector | Companies | 25th pct | Median | 75th pct |
|---|---|---|---|---|
| Financial services | 29 | 13.2% | 19.5% | 61.2% |
| Industrials | 77 | 13.7% | 28.2% | 44.7% |
| Technology | 43 | 17.1% | 28.3% | 47.8% |
| Communications | 27 | 20.0% | 29.3% | 54.9% |
| Banks & insurers | 48 | 22.9% | 34.0% | 47.9% |
| Energy | 34 | 20.5% | 34.6% | 60.5% |
| Consumer discretionary | 46 | 19.7% | 34.9% | 71.2% |
| Health care | 41 | 19.6% | 38.9% | 60.0% |
| Materials | 35 | 20.1% | 40.8% | 77.5% |
| Utilities | 58 | 53.1% | 61.5% | 74.2% |
| Consumer staples | 38 | 39.6% | 65.1% | 80.9% |
| Real estate | 50 | 56.3% | 66.6% | 80.1% |
Sectors with fewer than five companies measured are left out rather than shown as a median of two.
Why a single threshold does not survive the data
The common rule — under 60% healthy, over 80% a warning — fails on the first REIT it meets. A real estate investment trust is required to distribute most of its taxable income, and it is measured on funds from operations rather than earnings because property depreciation swamps the earnings figure. American Healthcare REIT paying 64.1% of funds from operations is ordinary for what it is. An industrial company paying the same share of free cash flow is stretched. A fixed band marks every REIT down for being a REIT.
The same holds in the other direction. A technology company paying 20% of free cash flow is not being prudent so much as being a technology company. The useful comparison is against companies measured the same way, which is why the coverage rating is scored within a sector and not against a fixed scale.
The five bases
Each has its own page: what it measures, when a company's filings make it the one that applies, and where the companies here sit on it.
- Earnings payout ratio — GAAP net income. The figure most screeners publish.
- Operating cash flow payout ratio — cash from operations, before capital spending.
- Free cash flow payout ratio — after paying to maintain the business. Applies to most companies here.
- FFO payout ratio — funds from operations, the REIT measure.
- Net investment income payout ratio — for business development companies and closed-end funds.
Common questions
What is a dividend payout ratio?
The share of a company's earnings, or of its cash flow, that it paid out as dividends over the same period. Dividends declared divided by the chosen measure, as a percentage. A ratio of 40% means forty cents of every dollar the measure produced went to shareholders.
What is a good dividend payout ratio?
There is no single figure, and any site that gives you one has stopped measuring. Across the 532 companies here, on the basis each company's own filings make applicable, the median payout is 41.9%. Half sit between 22.9% and 66.9%. But the sector medians below run from 19.5% to 66.6%, so a figure that is ordinary in one sector is stretched in another.
Is a payout ratio over 100% bad?
It means the company paid out more than that measure produced in that year, and the difference came from cash on hand, borrowing, or asset sales. It is not automatically a cut coming — an acquisition year, a settlement or a cyclical trough all do it once. It is a question to ask rather than an answer. 49 of the 532 companies here paid out more than the applying basis funded in their last filed year.
Why do two websites show different payout ratios for the same company?
Because they divide by different things and rarely say which. Most screeners publish the GAAP earnings ratio and label it the payout ratio. A company can look comfortable on earnings and impossible on cash in the same year — depreciation, working capital and capital spending all sit between the two. Every page here shows each basis a company's filings support and marks which one applies.
Where do these figures come from?
From each company's own annual filing, read out of SEC XBRL. Every page names the accession number its figures came from and links it to EDGAR, so any number here can be checked against the source. Nothing on this site is taken from a data vendor.
Look one up
Every company here shows its payout on each basis its filings support, marks which applies, and cites the filing. Search all 573 companies →