DO PAYOUT RATIOS EXCEED 100% ON A REGULAR BASIS? - ProProfs Discuss
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Do payout ratios exceed 100% on a regular basis?



Asked by Bromley, Last updated: Nov 24, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Its unreasonable to expect a dividend payout ratio in excess of 100% on a continuousbasis. the payout ratio is an indication of how much of a dividend a company pays asa percentage of earnings. for companies that consistently pay well over 100%, theimplication is that the company is draining their cash reserves and the retainedearnings of the company is falling.one must investigate whey a company has such a high payout ratio. typically, somecompanies with a poor earnings year will maintain dividend payments to investors. thiswould account for wildly high payout ratios. the real question is why the earnings areso low. is it because large write-offs (a non-cash item) have reduced earnings to a lowlevel even though the company brought in plenty of cash for the year? or is thecompany in genuine financial trouble?
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