A low payout ratio (say 30%) leaves plenty of room for reinvestment and future dividend growth. A very high ratio (80%+) means dividends could be at risk if earnings dip.
Payout ratios above 100% mean the company is paying more in dividends than it earns — funded from debt or cash reserves. That's usually a warning.
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Open Decision Lab →Frequently asked questions
What is a healthy payout ratio?
For most mature companies, 30–60% is considered sustainable. REITs and utilities routinely operate at higher levels for structural reasons.