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What is Dividend Payout ratio

Dividend payout ratio is the dividend per share divided by the earnings per share. Dividend payout ratio indicates the extent of the net profit distributed to the shareholders by way of dividend. A higher dividend payout ratio indicates that the company does not require further funds in the near future or it may also indicate that the cost of borrowing is less than the cost of equity. A low payout ratio is an indicator of the fact that company is in requirement of funds.

Note: Dividend per share /Earning per share

What is Dividend Yield:

This ratio reflects the percentage yield earned by investors by investing in company’s share at the current market price. This measures is specially useful for those investors who are interest in regular returns rather than capital appreciation.

Dividend Yield : Dividend per share/Market price x100

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