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Financial Terms

Dividend Payout Ratio

This ratio is an important factor for investors as it indicates how much of the company's profits are being shared with shareholders. Generally, a higher dividend payout ratio is seen as favorable as it means that the company is distributing a larger portion of its profits to shareholders. However, a very high ratio may also suggest that the company is not retaining enough earnings for growth and future investments.

Welcome to our lecture on finance terminology. Today, we will be discussing the Dividend Payout Ratio, an essential concept in understanding shareholder payouts. This ratio represents the percentage of a company's net income that is distributed as dividends to its shareholders. It is a crucial factor for investors as it reflects the company's generosity towards its shareholders. A higher ratio is generally considered favorable, indicating a larger share of profits being shared with shareholders. However, an excessively high ratio may also suggest that the company is not retaining enough earnings for future growth and investments.

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