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Posted by
Two Blokes May 9 -
Filed in
General
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#TwoBlokesTrading
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3 views
A payout ratio in the 60–80% range isn't necessarily a red flag. These companies are mature, with slower earnings growth, and they often choose to return a larger portion of profits to shareholders. Payout ratios can be misleading for certain capital-intensive sectors like REITs, telecoms, and pipelines. These businesses have high non-cash expenses like depreciation, which lower GAAP earnings and distort the payout ratio. Dividend investing isn't just about looking at yields or payout histories. It's also about evaluating management's track record as capital allocators and understanding when a big payout is a value-add, and when it might be a red flag.
