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Dividend Payout Ratio

A financial ratio that shows what percentage of a company's earnings are distributed to shareholders as dividends.

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The dividend payout ratio is calculated by dividing the total amount of dividends paid out to shareholders by the net income of the company. It provides an insight into the company's reinvestment strategy as well as its distribution policy to shareholders. A lower payout ratio may indicate that the company is reinvesting a significant portion of its earnings into its growth, while a higher payout ratio may suggest that the company is seeking to return profits to its shareholders. This ratio is particularly important to income investors who are looking for a steady stream of dividend income.
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