Target payout ratio,
Definition of Target payout ratio:
A target payout ratio is a measure of the percentage of a company's earnings it would like to pay out to shareholders as dividends over the long-term. Firms are conservative in setting their target dividend payout ratio with the goal of being able to maintain a stable dividend level while also retaining enough capital to grow and/or operate the business efficiently.
Sometimes the payout ratio is equal to the target payout ratio. Other times the payout ratio—which is dividends per share divided by earnings per share—may be higher or lower than the target rate because earnings fluctuate from quarter to quarter and year to year.
The amount of money a company wants to have to be able to pay dividends to investors.
How to use Target payout ratio in a sentence?
- Changes in dividend policy can have significant effects on stock prices and investor perception. Companies will often provide advance guidance on how dividends will look in the future and what their target payout ratio is.
- The payout ratio may differ from the target payout ratio as earnings fluctuate over time. This is why the target is typically a long-term goal or average over a longer period of time.
- Target payout ratio is the payout ratio the company would like to achieve over the long-term.
Meaning of Target payout ratio & Target payout ratio Definition