The payout ratio is the percentage of a company's earnings that it distributes to shareholders as dividends. A low payout ratio means the company retains most of its earnings for growth or other purposes. A high payout ratio means the company returns most of its profits to shareholders.
A company earns $100 million and pays $30 million in dividends, giving it a 30 percent payout ratio. This means the company returns 30 cents of every dollar earned to shareholders and reinvests the remaining 70 cents.
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