BigBen
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dividend payout ratio is just a ratio of the dividend paid over the net profits. if it is >100%, means the company pays more than it could afford. meaning, the company loan bank's money to pay dividend to shareholder. and this is the worse dividend you must have.
i haven't heard any stocks that have >100% dividend payout, but borrowing money just to pay dividend is the last thing i'd expect from my stocks. simpky because, in business, you can only loan money if the expected return much higher than the interest rates. and giving the cash out to shareholders won't bring any value to the company. this can happen if the company been pushed so hard to pay dividend by its shareholders (most probably corrupt/proxy). |
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don_hepburn
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Theoretically it could.
But that would mean the company is cutting into it's capital to pay dividends. Normally all dividends are from profits. Paying out dividends in excess of profits is not sustainable. Unless income increases quickly the company will have to reduce or eliminate it's dividend payout.
If that happens the price of the stock will go down drastically (like 30-90%) |
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googie
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More than 100% of earnings ? Many real estate investment trusts paid out more than their earnings because the depreciation schedule was figured ondouble declining balance which inflated expenses. |
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tjbrunz
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To add onto what googie has said, Real estate investment trusts can because in an accounting sense they depreciate the value of the real estate they own. Check out the payouts of DRE.
Duke reality’s earnings are consistent, but they HAVE to pay out 75% of what they bring in to maintain their tax benefits, so they may not horde the cash… One reason a REIT may be a good value right now.
Also in the short term (ie GM) when a company is loosing money they still sometimes pay a dividend, but it cannot last for long. |
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Oh Boy!
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Certainly.
If a company has a single bad quarter due to a non-recurring event then earnings might be too low to cover the dividend. If fact earnings might be negative and they might continue the dividend. One current example is Citigroup (C)
Dividends must be paid out of earnings or retained earnings so if the company continues to pay more in dividends than it earns it will draw down retained earnings and will eventually be unable to continue the dividend. |
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shoredude2
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Some companies pay out dividends even when they lost money, so they could continue their string of consecutive dividends paid. A company could pay out more than 100 percent in dividends for a quarter or two, but not in the long term. |
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Easy
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Possible in theory. Dividends paid out of retained earnings aka capital. This could be part of a return of capital to shareholders. But highly unlikely on an annual basis for any company. |
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wazz_up_144
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no, if the company is buying back, then it reaches 100%, and that is when it is spending money to pay for the dividend. no company would pay more than the price because it does not need to pay more for something that it gets anyways at a cheaper price |
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Frank Castle
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No. |
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