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So I was trying to calculate the dividends a company paid out from the balance / income sheet and the retained earnings (the delta between this and last period). I thought the dividends paid could be calculated by subtracting the delta in retained earnings from the net income but after trying to calculate the dividend payout ratio (i.e. dividend paid / net income) using this method the value was way too large. I know that some / most cashflow statements will have the dividends paid listed but even if I use the given div payout to calculate the dividend payout ratio I still get a number that is way too large.

Here is an example (Note values in millions) for LRCX Retained Earnings 11,521 (06/30/20) 9,931 (06/30/19) and net income is 2,252. Furthermore, there dividends paid is 656.84 and they have a dividend payout ratio (yield) of 4.60 ( 1.35%).

Can someone please show me how I am suppose to calculate the Dividend payout ratio (or even yield) from the above information ? I would prefer it be calculated from the retained earnings and net income data but I can't even get the right ratio value using the Dividends paid from their cash flow statement. I feel like there is something I am not understanding here (not the simple math) so if someone could explain this I would be very grateful.

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  • Dividend payout ratio is different than Dividend Yield. Dividend Yield is dividend divided by share price - payout ratio is the percentage of earnings that are paid out in dividends (dividends divided by net income)
    – D Stanley
    Commented Sep 3, 2020 at 12:49
  • yeah I know but in both cases you need to calculate the dividends paid out by the company. My question was how to calculate that from the balance sheet / income statement. My point was that I cannot back calculate dividends paid out from these financial statements and I can't seem to figure out why ? Maybe there is an explanation in the financial statements that I am not familiar with.
    – Charco
    Commented Sep 3, 2020 at 16:34
  • OK I thought you were comparing payout to yield. What are you comparing them against? 1.35% yield looks pretty close to what I see on Yahoo (1.43%).
    – D Stanley
    Commented Sep 3, 2020 at 17:02
  • Basically I am trying to see where the dividend payout ratio comes from based on the financial statements. As I mentioned I have tried to calculate this with 3 different companies and each time I get a ratio that far larger than the dividend payout ratio reported in a companies quote snapshot (i.e. on Yahoo etc.). So this makes me think there is something I am overlooking or the way I am calculating it (see original question) is oversimplified...
    – Charco
    Commented Sep 3, 2020 at 18:07
  • I don't see Dividend Payout Ratio on Yahoo (only Dividend Yield). Can you post a screenshot of were you see payout ratio?
    – D Stanley
    Commented Sep 3, 2020 at 18:11

1 Answer 1

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The dividend payout ratio measures the percentage of net income that is distributed to the shareholders in a from of dividend. In order to calculate dividend payout ratio you need two things:

  1. Net Income for the period and
  2. Dividend Paid (amount) for the same period.

The dividend payout ratio can be calculated by the following formula:

Dividend Payout Ratio = Dividends Paid / Net Income

You can find those number on the cash flow statement of the company. In your example LRCX in the last quarterly report has:

Net Income of: $696M

Dividend paid: $168M

Dividend Payout ratio = $168/$696 = 24.13%

If you know the retention ratio of the company, you can also calculate the dividend payout ration as inverse of the retention ratio:

Dividend Payout Ratio = 1 − Retention Ratio

A longer explanation of the calculations and examples here: Dividend payout ratio article.

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