Payout ratio measures the percentage of a company’s net income distributed to shareholders as dividends. A smaller ratio generally leaves more room for reinvestment and future dividend growth. section 2.4.6 section 5.1
Use the ratio as one input in dividend analysis, not as a standalone signal:
- Compare it with dividend yield and dividend growth rate; a high yield may reflect a falling share price and greater risk of a reduced payout. section 5.1
- Interpret lower ratios as potentially greater capacity for growth and reinvestment, while mature companies may distribute more of their profits. section 5.1 section 5.5
- Check payment history, annual payout, company growth, and the investor’s alternative assets before forming an investment thesis. section 2.4.6 section 5.5
Comparing payout strategies
The dividend table records Apple at a 14.10% payout ratio, Microsoft at 25.04%, Walmart at 34.03%, Coca-Cola at 67.99%, and Altria at 77.54%. NVIDIA, at 1.25%, retains nearly all reported profits for other uses. These figures become more useful when read alongside yield, five-year dividend growth, and consecutive growth years. section 2.4.6
Table 2.9 Dividends of Apple, Altria, Microsoft, NVIDIA, Sempra, Walmart, and Coca-Cola highlighting different payout strategies
|
Company
|
Yield FWD %
|
Payout ratio %
|
Div growth 5Y %
|
Consecutive years of growth
|
Consecutive years of dividend payments
|
|---|---|---|---|---|---|
|
Apple (AAPL)
|
0.51
|
14.10
|
5.24
|
12
|
12
|
|
Altria (MO)
|
6.89
|
77.54
|
4.00
|
55
|
55
|
|
Microsoft (MSFT)
|
0.71
|
25.04
|
10.24
|
20
|
20
|
|
NVIDIA (NVDA)
|
0.03
|
1.25
|
20.11
|
1
|
12
|
|
Sempra (SRE)
|
3.36
|
53.18
|
4.88
|
14
|
26
|
|
Walmart (WMT)
|
0.96
|
34.03
|
4.41
|
51
|
51
|
|
Coca-Cola (KO)
|
2.86
|
67.99
|
4.20
|
62
|
62
|
|
Data from Seeking Alpha on June 8, 2025 (
https://seekingalpha.com)
|
Compare payout ratio, dividend yield, dividend growth, and payment history across growth-oriented and dividend-oriented companies. section 2.4.6
Table 2.10 Looking at a dividend scorecard from data collected via Python
|
Company
|
Sector
|
Industry
|
Dividend yield
|
Payout ratio
|
|---|---|---|---|---|
|
Microsoft (MSFT)
|
Technology
|
Software - Infrastructure
|
0.71
|
0.2442
|
|
Walmart (WMT)
|
Consumer Defensive
|
Discount Stores
|
0.96
|
0.3665
|
|
NVIDIA (NVDA)
|
Technology
|
Semiconductors
|
0.03
|
0.0129
|
|
Sempra (SRE)
|
Utilities
|
Utilities - Diversified
|
3.36
|
0.4404
|
|
Apple (AAPL)
|
Technology
|
Consumer Electronics
|
0.51
|
0.1558
|
|
Altria (MO)
|
Consumer Defensive
|
Tobacco
|
6.89
|
0.6779
|
|
VICI Properties (VICI)
|
Real Estate
|
REIT - Diversified
|
5.50
|
0.650
|
|
Restaurant Brands International (RBI.VI)
|
Financial Services
|
Banks - Regional
|
4.06
|
0.4297
|
|
Data collected using yfinance
|
Inspect a Python-collected dividend scorecard that places payout ratios beside sectors, industries, and dividend yields. section 5.1
