The pay-out ratio is an important part of any dividend stock analysis. And yet sources like Dividend Radar (and many others) fail to include this information.
What is a good source for reporting the pay-out ratio?
culcha
In most cases multiply the %yield by the price earnings ratio to get % of earnings paid as dividend. 50% or less is safe. Higher is risky as most companies will not borrow to pay dividends. But may be ok if company thinks earnings decline is temporary (as happened at Exxon during the recent low oil prices from Covid).
This works reasonably well for most stocks. For some cash flow is more important. And as always, volatility and sharp changes in earnings can be a factor.
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I go to M* to start, generally a good source for data but I really can’t judge their accuracy. It shows 98.x% for XOM in 2019 (lastest shown).
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My go-to first source is Yahoo! Finance’s “key statistics” page for any given company stock. There’s a “dividends and splits” section that lists a payout ratio. For example: https://finance.yahoo.com/quote/MCD/key-statistics?p=MCD
I find it’s generally reliable but not perfect. It tends to be slow to update after dividend changes and doesn’t always get the math right when a company’s dividend policy is to pay 1-3 “typical” dividends and then 1 “catch up” dividend to reach its targeted payout ratio for the year. In addition, it’s an automatic calculation that looks at payout with respect to earnings, so the numbers can look a little scary for companies like REITs and energy partnerships that pay their dividends based on cash flow rather than accounting earnings.
Regards,
-Chuck
Home Fool
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As mentioned before, Yahoo Finance is pretty good. I usually use the research features of my accounts at both Schwab and Fidelity right on the brokerage’s website. It doesn’t give you everything - no place does - but EPS and dividend numbers are pretty basic and you can always find those. What you get from another brokerage might well vary.
Bill
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…50% or less is safe…
It would be better to compare within an industry/sector than a blanket rule. REITs by law have to pay out 90% of taxable income so they will always have a high payout ratio. Some mature industries/companies with lower capital expenditures can have a higher payout ratio.
Sure it is a pain to try and compare to industry averages but gives a better picture. FWIW, Fidelity shows industry averages when you do individual stock research.
JLC
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