This is the ratio of dividends to earnings. Dividends are generally paid out of earnings. The company may pay some of these earnings to you as the shareholder and retain some to put back into the company. More mature companies tend to have higher dividend payout ratios.
It represents the income from dividends divided by the share price.
Keep in mind you can use your dividend income to buy more shares of your investment, or you can have your custodian or broker pay the dividends in cash to you. Stock market volatility can be disheartening to anyone. Evaluate ways to cushion the roller coaster ride of stock price fluctuation with a steady stream of dividend income. Just as a landlord seeks to receive a positive cash flow from rent, an income and growth investor can seek dividend-paying stocks for positive cash flows. --By Scott Hughes, CFP, MBA, a financial planning advisor and president of