Dividends divided by net income.
This shows the percent of company earnings that is being paid out to stockholders. If the dividend payout ratio is 95%, we would say that the dividend is not safe, not well covered. If the company makes just a little less money, they won’t have enough to pay this dividend next year. If the dividend ratio is 10%, the company could make a lot less money and still afford to keep up the dividends at the same level. In this case the company also has enough left over for investment or a rainy day.