Net Payout Yield

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Definition

The percent a company has sent back to its shareholders through share repurchases and dividends based on a company's market cap. If a company with a 500 million market cap has purchased 50 million of stock and has a dividend yield of 10% over the last twelve months, the net payout yield would be 20%.

A high (low) payout yield indicates the company is reacting favorably (indifferent) to its shareholders. All things being equal, a high payout yield is preferable to shareholders.

The difference between Payout Yields and Net Payout Yields can often be confusing.

Payout Yield is frequently one component - how much has the company sent back to its shareholders in dividends. Net Payout Yield consists of two (or more) components - how much has the company sent back to its shareholder in dividends AND how much did the company repurchase its own stock shares?

However, companies can also repurchase shares, thus leading to stock appreciation for its shareholders too. Thus, a Net Payout Yield thinks of two components: how much common dividends were sent back AND how much did the company repurchase its own stock shares?

For more information on evaluating valuation multiples similar to this, please see our original white paper research : Making Sense Of Valuation Multiples.

Formula

YCharts calculates payout yield as the last twelve months of equity purchased and total common dividends paid over the market market capitalization of a stock.

If a company with 500MM market cap repurchases 50 million over the last twelve months and has a dividend yield (TTM) of 3%, the net payout yield would be 13%.

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