Dividend payout ratio calculator (EPS, FCF, FFO)
A dividend is only as strong as the money behind it. Put in what the company paid and what it brought in, and see how much of it went out the door.
| Measured against | Payout ratio | How to read it |
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How it works: payout ratio = what the company paid in dividends ÷ what it brought in, × 100. Against earnings: dividend per share ÷ EPS. Against cash: total dividends ÷ free cash flow (the cash left after running the business and paying for new equipment). For a REIT: dividend per share ÷ FFO per share, because REIT earnings are squeezed down by a large non-cash cost (depreciation on buildings) and FFO adds it back. Fill any pair you have; blank pairs are skipped. The bands are rough: under 30% low, 30–60% middle, 60–100% high, over 100% paying out more than came in. A negative or zero base is refused, because a ratio on a loss means nothing.
Why the cash number beats the earnings number
Dividends are paid in cash, not in earnings. Earnings can look fine while the cash is short: money stuck in unpaid customer bills, a big building project, one-off gains booked as profit. The default example shows exactly that. Earnings say 62.5%: high, but covered. Free cash flow says 125%: the company paid out more cash than it made, and the gap came from savings or borrowing. A dividend can run on borrowed money for a while. It can't run on it forever. That gap is one of the first dividend trap warning signs, and the reason a high dividend yield can be bad news.
One year is a photo. Five years is the movie.
A single ratio over 100% can be a bad year with a good reason. A ratio that climbs year after year, while the dividend keeps rising faster than earnings, is the pattern that ends in a cut. Run the numbers for each of the last few years, not just the latest. For how payout ratios fit with yield, growth and taxes, start with dividend investing explained.
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