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Dividend and Retention

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Dividend Payout Ratio

Summary of Dividend and Retention Ratio. Abstract

 

Dividend and retention...The DPR is a model for Cash Flow Measurement used by investors to determine if a company is generating a sufficient level of cash flow to assure a continued stream of dividends to them. It is also a measurement of the amount of current net income paid out in dividends rather than retained by the business.


The DPR Formula for cash flow measurement is relatively straightforward:

Divide the total Annual Dividend Payments by the total annual Net Income plus Noncash Expenses minus Noncash Sales.


Calculating the DPR for one year provides a very unreliable indication only. A better approach is to run a trend line on the ratio for several years to see if a general pattern of decline or increase emerges.


This ratio is useful in projecting the growth of company as well. Its inverse, the Retention Ratio (the amount not paid out to shareholders in the form of dividends), can help project a company’s growth.


Compare with the Dividend Payout Ratio:  Cash Flow from Operations  |  Debt to Equity Ratio  |  CFROI  |  Cash Value Added  |  Cash Ratio  |  Economic Value Added

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