Some More Dividend Payout Ratio Data

In yesterday’s post I floated the alternative view that high dividend payouts lead to better earnings for a company. Today I thought I would show some of the residual facts and figures I found when researching yesterday’s topic. I have included some data on the average dividend payout ratios for various types of companies, the decline of dividend payout ratios for the S&P 500 over time, and other various statistics about the dividend payout ratio.

The Average Payout Ratio for Various Types of Companies

This data is from Bryan Perry at the “The 25% Cash Machine” blog. It shows the average dividend payout ratio for various types of companies.

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S&P Dividend Payout Ratios 1981 – 2006

This next chart was compiled by Legg Mason with data from the S&P. It shows the decline in dividend payout ratios over time, and Legg argues that this low payout ratio, combined with the high levels of cash flow and earnings levels of many companies, could provide a catalyst for dividends to rise further.

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As with yesterday, it is important to understand a company’s dividend payout ratio in the context of its history. Further understanding of data such as the charts above can help to make better investment decisions.