Calculator · Canada & US
Payout ratio health checker
Enter dividend, earnings and free cash flow per share to check earnings and cash payout ratios, coverage and debt against teaching bands by business type.
I only read the numbers you give me. Take them from the company's latest annual report, and use the same period for all of them.
Numbers from the annual report
Can be negative.
Operating cash flow minus capital spending, ÷ shares.
Health check Worth a closer look
Earnings payout
67%
Adjusted payout
—
Cash payout (FCF)
77%
Earnings coverage
1.50×
Worth a closer look: The earnings payout ratio of 67% leaves a thin cushion. Check whether results are temporarily depressed or the payout has been rising faster than profits.
Comfortable: Dividends use 77% of free cash flow.
Teaching bands for this type: up to 60% of earnings reads as comfortable, 60%–80% as stretched. They are rules of thumb for learning, not a rating, and normal levels vary by industry and business model.
Estimate for education, not advice. This site does not recommend, rate or rank any security and does not know your full situation. Results depend on your inputs and the simplifications listed under Method. Check tax details with the CRA or IRS, or a qualified professional. Read the disclaimer.
How to use it
- Pick the business type. REITs and utilities normally pay out more than other companies, so the bands differ.
- Enter the annual dividend per share and earnings per share from the same 12-month period.
- Add free cash flow per share and an adjusted figure (for REITs, AFFO or distributable cash flow per unit) if you have them.
- Optionally add net debt ÷ EBITDA. Read each flag and the reason behind it.
Method and limits
- Earnings payout ratio = dividend per share ÷ earnings per share. Cash payout ratio = dividend per share ÷ free cash flow per share. Coverage = earnings ÷ dividend.
- Teaching bands (general 60% / 80%, utilities 75% / 90%, REITs 80% / 95% of AFFO, banks 50% / 70%) are rules of thumb for learning, not industry standards or a rating. Companies with very stable cash flows can sustain higher payouts; cyclical companies may need lower ones.
- Negative or zero earnings or cash flow with a positive dividend is flagged, because the dividend is then funded from something other than current results.
Frequently asked questions
Which payout ratio matters more, earnings or cash?
Both. Earnings include non-cash items like depreciation, which is why REITs use cash-flow measures. Free cash flow shows what is left after the spending needed to keep the business running, which is what actually funds dividends.
Can a payout ratio above 100% be fine?
For a year, sometimes: a one-off charge can depress earnings while cash flow is healthy. Persistently paying more than the business generates means the dividend relies on debt, asset sales or new shares.
Does this tool rate any company?
No. It has no company data at all. It applies the same arithmetic and bands to whatever numbers you enter.