Under the constant dividend policy, a company pays a percentage of its earnings as dividends every year. In this way, investors experience the full volatility of company earnings. If earnings are up, investors get a larger dividend; if earnings are down, investors may not receive a dividend.

How do you find the constant dividend payout ratio?

Formula and Calculation of Dividend Payout Ratio The dividend payout ratio can be calculated as the yearly dividend per share divided by the earnings per share (EPS), or equivalently, the dividends divided by net income (as shown below).

What is stable dividend rate?

Companies with a stable dividend policy provide a fixed dividend payment every year, even when earnings are volatile. For example, if a payout rate of 8% is set, then that’s the percentage of profits that the company will pay out, regardless of its performance during the financial year.