The dividend payout ratio is the fraction of net income a firm pays to its stockholders in dividends: The part of earnings not paid to investors is left for investment to provide for future earnings growth.
High growth firms in early life generally have low or zero payout ratios.
Some companies choose stock buybacks as an alternative to dividends; in such cases this ratio becomes less meaningful.
[2] The payout rate has gradually declined from 90% of operating earnings in 1940s to about 30% in recent years.
For smaller, growth companies, the average payout ratio can be as low as 10%.