Payout Ratio 

The Payout Ratio measures the proportion of a company’s earnings paid out to shareholders in the form of dividends. It indicates how much profit is being returned to investors versus retained for reinvestment in the business. 

Formula: 

 Payout Ratio = (Dividends per Share ÷ Earnings per Share) × 100 

A high payout ratio may appeal to income-focused investors but could signal limited growth opportunities if excessive profits are distributed instead of reinvested. Conversely, a low payout ratio suggests a growth-oriented strategy with earnings retained for expansion or debt reduction.