Calculate dividend payout ratio, retention ratio, and sustainable growth rate from earnings per share and dividend per share data.
This calculator turns per-share earnings and dividends into the share of earnings distributed and the share retained. Enter earnings per share and dividend per share for the same company, share class, and period; add return on equity for the sustainable growth calculation. It divides dividends per share by earnings per share, subtracts that result from 100% for retention, and multiplies retention by return on equity for sustainable growth. The common mistake is mixing annual EPS with a quarterly dividend, which makes the payout ratio incomparable.
A concrete input and expected output from the current implementation.
Input
Earnings per share: $5.00 Dividend per share: $2.00 Return on equity: 15%
Expected output
Dividend payout ratio: 40% Retention ratio: 60% Sustainable growth rate: 9%
$2.00 divided by $5.00 is 0.40, so 40% of earnings are paid and 60% are retained. Multiplying the 0.60 retention ratio by 0.15 return on equity gives 0.09, or 9%.
For the payout ratio, dividend per share is divided by earnings per share and expressed as a percentage. The retention ratio is one minus that decimal, also expressed as a percentage. With EPS of $5 and dividends of $2, the payout decimal is 0.4 and the retention decimal is 0.6. Both inputs must cover the same period.
Sustainable growth rate is retention ratio times return on equity, with both factors used as decimals. A 60% retention ratio and 15% return on equity give 0.60 x 0.15 = 0.09, or 9%. This is a steady-state estimate tied to profitability and reinvestment, not a forecast derived from revenue, cash flow, or market conditions.
Yes. If dividend per share exceeds positive earnings per share, the ratio is above 100%. That means the company distributed more than it earned during the measured period, possibly using existing cash, borrowing, or other funding. It does not alone establish whether the dividend is sustainable or whether management will reduce it.
No. It shows the growth implied by the entered return on equity and the calculated retention ratio. Actual growth can differ because profitability, financing, share count, dividend policy, and business conditions change. Treat the result as a consistent-assumptions estimate, not as a price target, management forecast, or guaranteed earnings-growth rate.
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