Many investors like to keep things simple and use the payout ratio as a quick filter to determine if a company can afford to share the wealth with its shareholders. It often looks like this: Payout ratio under 80% = dividend is safe Payout ratio above 80% = dividend is unsafe That shortcut is a bad use of the payout ratio. Yes, the payout ratio is a valuable indicator of dividend sustainability. But you can’t take a number from a stock screener or finance site and draw a …
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