A higher ratio means the company pays out a greater percentage of its earnings to shareholders as dividends. Look for a dividend payout ratio between 30% and 60%, a good indicator of financial health.

Investors use the dividend payout ratio to understand how much of a company’s income is paid out as dividends. Learn more about the dividend payout and how to calculate it.

If the ratio is high, it means the company is giving a big slice of its pie (or profits) to its shareholders. ... The dividend payout ratio helps us see what a company does with its profits.

A lower dividend payout ratio means the company retains more earnings. It can use retained earnings to reinvest in the business to fuel growth or pay down debt, which can benefit shareholders.