Indicator Dividend payout ratio expresses what proportion of profit is paid out as a dividend / profit sharing. The rest of the profit may be used by the company for further development.
- shareholders favoring profit will prefer high dividend payout ratio; conversely shareholders favoring the growth in value of shares will prefer lower values
- companies in the later stages of the life cycle tend to have a higher payout ratio than new companies
- if profit declines, the company management usually tend to "smooth" the amount of dividends to shareholders in order to avoid any possible speculation about worsening of the company situation.
If the company wants to pay a dividend, it must meet certain conditions.