Dividend Payout ratio, or simply payout ratio, is the percentage of a company’s earnings paid as dividends to the shareholders. It indicates how well the company’s earnings support the dividend payment.
Dividend Payout ratio = Dividend per equity share X 100
Earnings per share (EPS)
E.g.: For FY13, a company had EPS of Rs. 10. It paid dividend of 20% (Rs. 2 per equity share of Rs. 10 each) for the year.
Dividend payout ratio = Rs. 2 X 100
Dividend payout ratio = 20%