Ask the Fool Payout Ratios

Q: What's a "payout ratio"? - R.B., Hartford, Conn. A: It's the percentage of a company's earnings (net income) paid out to shareholders as a dividend. For example, McDonald's is expected to earn approximately $3.82 per share in fiscal 2009, and its annual dividend amount is currently $2. Divide $2 by $3.82 and you'll get 0.52, or a payout ratio of 52 percent.

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