The dividend payout ratio divides a company’s total dividends paid by its net profit, showing what portion of earnings the company returns to shareholders as dividends rather than retaining for reinvestment or debt repayment.
For example, a company that earns RM50 million in net profit and pays out RM20 million in dividends has a payout ratio of 40% — it distributes 40% of its earnings and retains the remaining 60%.
Payout ratio is the standard companion check to dividend yield, since yield alone can’t show whether a dividend leaves the company enough earnings buffer to sustain it through a weaker period. See how to screen for dividend stocks for how the two are typically combined.