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The payout ratio gauge

Why a 70% payout can be comfortable for a utility and stretched for a cyclical company: teaching bands for general companies, utilities, REITs and banks.

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In one paragraphThe payout ratio is dividends divided by earnings (or cash flow). What counts as comfortable depends on how stable the business is. These teaching bands are rules of thumb, not standards: they show why the same ratio can mean different things in different industries.
0% → 100%

General company (earnings)

Comfortable ≤ 60% · stretched to 80%

0% → 100%

Utility or pipeline (earnings)

Comfortable ≤ 75% · stretched to 90%

0% → 100%

REIT (AFFO)

Comfortable ≤ 80% · stretched to 95%

0% → 100%

Bank or insurer (earnings)

Comfortable ≤ 50% · stretched to 70%

Teaching bands used by our payout checker. They are rules of thumb for learning, not standards or ratings; above 100% means paying out more than the business earned on that measure.

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