The dividend payout ratio, what is it? Well, it's the percentage of net income paid out to investors. And it's calculated by taking your dividends paid and dividing it by net income. Net income is what could be paid out to investors, it's the earnings attributable to shareholders, but your dividends paid is the amount that's actually paid out. So why is it important? Well, firstly, it shows the ability of the company to return cash to shareholders. While some companies choose to hold onto some of their cash other companies have so much cash, they're able to pay it out and barely even notice that the money's gone. Now the amount not paid out is retained. The more money that the company retains, then the quicker it can grow without using any external extra funding, such as another equity issuance or debt issuance. Now, early stage firms retain more cash than mature firms. Early stage firms can't pay out lots of their cash 'cause they're trying to grow and they need that money to reinvest and grow. More mature firms with less ability to grow now, they're able to pay out more of their money, but it's important to realize that some mature firms decide we are never going to pay out the dividends, we're just gonna keep the money, try and grow more, and shareholders will instead get a return from the growth of the share price. But the dividend payout ratio, an important ratio for shareholders.