Part 5 · Comparing companies with financial ratios · Lesson 25
Dividend metrics: payout ratio and dividend yield
How much of the money a company earns does it share with shareholders? Calculate the payout ratio, dividend per share and dividend yield, and open the 'Dividends' section of an annual report yourself.
QToday's question
A company's dividend yield suddenly doubled. Did it double its dividend?
Dividend yields like 5% or 8% catch the eye. But this number rises when a company raises its dividend, and it also rises when the stock price falls. In this lesson you split dividends into three numbers, calculate them, and learn how to check with the financial statements whether that dividend can continue.
MAPLearning map for this lesson
We build it up in three steps. At the end of each step, a 'Quick check' lets you test your understanding before moving on.
In Lesson 9 you saw retained earnings move as beginning KRW 2.6 billion + net income KRW 1.2 billion − dividends KRW 300 million = KRW 3.5 billion. In Lesson 11 you split consolidated net income into the parent's share and non-controlling interest, and in Lesson 16 you calculated EPS of KRW 600. The free cash flow (FCF) of KRW 1 billion from Lesson 20 and the idea from the preceding Lesson 24 that 'BPS grows by the profit you retain' are also ingredients for this lesson.
- STEP 1 · Basic conceptsThree numbers that measure dividends
Calculate the , , and from the financial statements and share price, and explain what each of the three tells you.
- STEP 2 · Understanding the logicHow long will a dividend last?
Judge the sustainability of a dividend from earnings, cash flow and retained earnings, and understand the dividend record date system and dividend income tax.
- STEP 3 · Real-world applicationFind dividends on DART and read three years
Read the key dividend indicators table in the 'Dividends' section of the annual report, and explain, by splitting into earnings and dividends, why the payout ratio changed so much.
STEP 1Three numbers that measure dividends
A dividend is a part of the money a company earns, paid to shareholders in cash. Measure how much was paid out from the company's side, from the per-share side, and from your invested money's side.
From the company's side: payout ratio
The is the percentage of net income paid out as dividends. The fictional Robin Bakery paid KRW 300 million of its KRW 1.2 billion net income as dividends, so it is KRW 300 million ÷ KRW 1.2 billion = 25%. The remaining 75%, KRW 900 million, stays in the company as and is used to expand equipment and repay debt. As you saw in Lesson 24, profit retained this way grows BPS.
Think of a fruit tree: net income is this year's fruit, and the payout ratio is the share you pick and hand out. Hand out a lot and the share you receive now is bigger; keep a lot and the tree grows more and may bear more fruit next year. Which is better depends on how well the company can earn with the money it keeps, that is, the ROE from Lesson 23.
As with EPS in Lesson 16, the net income in the denominator is . The dividend table in actual annual reports also calculates the '(consolidated) cash dividend payout ratio' on this basis, and the requirements for the separate taxation of high-dividend companies' dividend income, effective from 2026, define the payout ratio as 'total cash dividends ÷ net income attributable to owners of the parent'.
From the per-share side: dividend per share
(DPS) is total dividends divided by the number of shares. For Robin Bakery it is KRW 300 million ÷ 2 million shares = KRW 150. That is KRW 150 received out of EPS of KRW 600, so on a per-share basis the payout ratio is also 150 ÷ 600 = 25%. Treasury stock does not receive dividends, so in practice you divide by the share count excluding treasury stock.
From your invested money's side: dividend yield
The is dividend per share divided by the share price. If you buy a share at KRW 9,000 and receive KRW 150 a year, it is 150 ÷ 9,000 ≈ 1.67%. It is the most quoted because it is easy to compare with deposit interest rates, but you must remember the denominator is the share price. Even if you receive the same KRW 150, if the share price falls to KRW 6,000 the dividend yield 'rises' to 2.5%.
Quick checkRobin Bakery keeps total dividends at KRW 300 million but net income falls to KRW 600 million. What happens to the payout ratio and dividend per share?
STEP 2How long will a dividend last?
A dividend matters more when you can keep receiving it, not just once. Measure the dividend's stamina using earnings, cash and accumulated retained earnings, and sort out when and who receives it, and the tax.
Dividend stamina: cash over earnings
Dividends are paid in cash from the bank account, not from book profit. That is why the cash flow statement you learned in Part 4 becomes the key tool for reading dividends. Robin Bakery earns KRW 1.8 billion from operations and spends KRW 800 million on capital expenditure, so the free cash flow (FCF) you saw in Lesson 20 is KRW 1 billion. A KRW 300 million dividend is only 30% of FCF, so it can withstand a modest drop in earnings.
By contrast, Dark Cloud Electronics (fictional) posted net income of KRW 300 million in its third year, but its cash flow from operating activities was −KRW 2.2 billion. If such a company pays a dividend, the money ultimately comes from borrowing or convertible bonds (CBs). Even if the book payout ratio looks reasonable, a dividend not backed by cash is hard to sustain. That is why, when looking at dividends, you first check whether total dividends fit within FCF.
Under the Commercial Act, dividends can be paid only within the limit of 'distributable profit' such as retained earnings. So some companies keep paying dividends out of accumulated retained earnings even after a year or two of losses. But retained earnings shrink, and BPS shrinks with them. If a company holds its dividend while losing money, you need to ask 'how long can this last?'
Dividend policies differ by company
How dividends are decided varies by company. A company that pledges to pay a set percentage of profit (a payout ratio target) pays less when profit falls. A company that pledges to keep dividend per share steady maintains the dividend even when profit falls, but its payout ratio swings widely. Some companies use a set percentage of free cash flow as the pool for shareholder returns. The policy is written at the start of the annual report's 'Dividend section', so before looking at the numbers, read what promise the company has made. Buying and it instead of paying dividends is also a form of shareholder return (Lesson 16).
When and who receives it: the dividend record date
Dividends go to the shareholders who hold the shares on the . Until now, Korean listed companies often set the record date at the end of December and only decided the dividend amount at the annual general meeting the following March. Investors had to buy shares at year-end without knowing how much they would receive. This is the so-called 'blind dividend'.
On January 31, 2023, the Financial Services Commission and the Ministry of Justice announced the 'Dividend Procedure Improvement Plan'. An authoritative interpretation of Article 354 of the Commercial Act made it possible to separate the date that determines who may vote from the date that determines who receives the dividend, opening the way to deciding the dividend amount first and setting the record date afterward. Year-end dividends can use this approach through that interpretation, and became able to use the same approach through the Financial Investment Services and Capital Markets Act amendment passed by the National Assembly on December 27, 2024 (effective on promulgation). However, whether to actually change requires the company to amend its articles of incorporation, and according to the FSC, about 42% of listed companies (1,008 companies) reflected the year-end dividend procedure improvement in their articles, and for the 2023 year-end dividends, 109 of the 321 dividend-paying companies actually paid under the changed procedure. So you still need to check the dates company by company.
Tax: 15.4% and separate taxation for high-dividend companies
When you receive dividends from a Korean listed company, , combining 14% income tax and 1.4% local income tax, is withheld before the money arrives. If financial income (interest plus dividends) exceeds KRW 20 million a year, the excess is combined with other income and taxed comprehensively. For payments from January 1, 2026, there is also a special provision allowing if requirements are met (for income attributable through 2028). The requirements are a listed company that did not cut its cash dividend from the prior year and has a payout ratio of 40% or more, or a payout ratio of 25% or more with a dividend increase of 10% or more over the prior year, and the tax rate is 14–30% depending on the dividend income bracket. You can run the detailed calculation with the Comprehensive Financial Income Tax and Health Insurance Premium Checker.
See it in a chart: dividend calculator
Change the net income, payout ratio and stock price of Robin Bakery (fictional, 2 million shares, FCF KRW 1 billion) and the number of shares you hold. The upper bar splits net income into 'dividend' and 'retained in the company', and the lower bar shows whether total dividends fit within FCF.
This is a fictional company calculation. The after-tax amount reflects only the 15.4% withholding; it does not include comprehensive taxation of financial income or electing separate taxation for high-dividend companies. For the separate taxation requirements, besides the payout ratio you must also consider conditions such as 'not having cut the dividend from the previous year'.
Common misconceptions
- "A high dividend yield means a good dividend stock?"
- The yield may have risen because the stock price fell sharply, or because of a one-time special dividend. Look at how dividend per share has moved over several years and whether the dividend fits within FCF.
- "The higher the payout ratio, the more the company cares about shareholders?"
- If a company can earn a high ROE on the money it keeps, paying less and reinvesting may be better for shareholders. Conversely, if a company has weak earnings but just piles up cash, a low payout ratio becomes a reason P/B stays depressed (Lesson 24).
- "If I buy just before the record date and sell the next day, I earn the dividend for free?"
- On the day the right to the dividend disappears, the stock price often weakens by about that amount, and a 15.4% tax is also applied to the dividend. It is more accurate to think of a dividend as the share you earn for holding a company for a long time.
Quick checkIf Robin Bakery pays a 40% payout ratio out of KRW 1.2 billion of net income, what are dividend per share and dividend yield (stock price KRW 9,000)? Does the total dividend fit within FCF of KRW 1 billion?
STEP 3Find dividends on DART and read three years
Companies gather dividends in a single table. Just open 'Dividends' in Chapter III of the annual report and you can see the payout ratio, dividend yield and dividend per share for three years at once.
Find it yourself on DART: Dividends
The screen below shows the opened in a large listed company's annual report (filed March 11, 2025, covering 2024 results). It is only an example of finding your way around and is not an investment recommendation.
12345- 1In the document table of contents, open III. Financial Matters → 6. Dividends. It is laid out in the order 6-1 Dividend policy, 6-2 Dividend predictability (record date), and 'Key dividend indicators' under 6-3 Other reference items.
- 2(Consolidated) net income is the owners-of-the-parent share. It is the denominator of the payout ratio.
- 3Total cash dividends is the numerator. For companies paying quarterly dividends, it is the full-year total of the Q1–Q3 dividends plus the year-end dividend.
- 4(Consolidated) cash dividend payout ratio = 3 ÷ 2. Check whether the value the company calculated matches the one you divide yourself.
- 5Cash dividend per share is listed separately for common and preferred shares. Also look at the cash dividend yield in the row just above.
Source: Financial Supervisory Service DART, Samsung Electronics annual report (filed 2025.03.11, rcpNo 20250311001085), III-6 Dividends screen, captured 2026-10-08. This is a navigation example and not a stock recommendation.
See it in a chart: same dividend, different payout ratio
The three years from the table above redrawn as bars. Gray is net income attributable to owners of the parent, and orange is total cash dividends. Click a year to see that year's story.
Click a year.
Source: Samsung Electronics annual report (filed 2025.03.11, rcpNo 20250311001085), III-6-3 Key dividend indicators. Unit: KRW trillion (rounded from KRW millions). The payout ratio is the disclosed value and matches Robin Invest's own division (9,810,767 ÷ 33,621,363 ≈ 29.2%, etc.). This is not a stock recommendation.
Reading the table, this company's total cash dividends were nearly the same, about KRW 9.8 trillion, for three years. Cash dividend per common share was also KRW 1,444 → KRW 1,444 → KRW 1,446. Yet the payout ratio swung widely: 17.9% → 67.8% → 29.2%. It's not that the dividend changed; the denominator, net income, moved sharply: KRW 54.7 trillion → KRW 14.5 trillion → KRW 33.6 trillion. The dividend policy in 6-1 also says that for the three years 2024–2026 it will 'maintain a regular dividend of about KRW 9.8 trillion a year', funded by 50% of free cash flow. For a company with a policy of protecting dividend per share, it is natural for the payout ratio to rise in bad earnings years and fall in good ones.
6-2 also states whether the record date reform was reflected in the articles of incorporation. This report says 'whether the articles allow setting the record date after the dividend amount is decided: No' and 'Future plan: under review', and the record date of the year-end dividend was December 31 with the dividend amount confirmed in March of the following year. Instead, it explained that it provides predictability through a three-year shareholder return policy and regular dividends of the same amount every quarter. In this way, 6-2 is the box where you check how a company handles its dividend dates.
How to use it in investing
| When you see numbers like this | Try reading them like this |
|---|---|
| Payout ratio suddenly rose sharply | Check items 2 and 3 in the table separately to see whether the dividend grew or net income shrank |
| Dividend yield suddenly rose | Check whether dividend per share is unchanged and the stock price fell, or whether it was a special dividend |
| Total dividends exceed FCF | Paying dividends from borrowing or accumulated cash. Check the cash flow statement and debt to see how many years it can last |
| Kept the dividend despite a loss | Check in 6-1 whether retained earnings and cash are sufficient and whether the dividend policy includes a promise to 'maintain dividend per share' |
| Record date is not at the end of December | A company that sets the record date after confirming the dividend amount. Check the record date in 6-2 and in the dividend decision filing, and judge the timing of your purchase |
| Payout ratio crossed 40% for the first time | May relate to the high-dividend company separate taxation requirements. Also check other requirements such as whether the dividend was cut from the previous year |
Not always. A company with heavy growth investment is not a bad company for shareholders even if it pays little or no dividend, and some companies return value through share cancellation instead of dividends. Tax law and dividend procedures can change, so check the latest official guidance before actually filing or investing. This lesson does not recommend buying or selling any particular stock.
Quick checkIn the table above, total cash dividends for 2023 (the 55th term) were about KRW 9.81 trillion and net income attributable to owners of the parent was about KRW 14.47 trillion. Calculate the payout ratio yourself and explain in one sentence why it came out high.
✓What we learned today
- Payout ratio = total cash dividends ÷ net income attributable to owners of the parent. Robin Bakery (fictional): KRW 300 million ÷ KRW 1.2 billion = 25%.
- Dividend per share (DPS) = total dividends ÷ number of shares and dividend yield = DPS ÷ stock price. Robin Bakery's DPS is KRW 150, and KRW 150 ÷ KRW 9,000 ≈ 1.67%. The dividend yield also rises when the stock price falls.
- For a dividend to last, a company needs cash, not just earnings. Robin Bakery comfortably covers its KRW 300 million dividend with KRW 1 billion of FCF. A dividend from a company that reports profits but is running short of cash may be paid with debt.
- Year-end dividends since 2023 and, after the 2024 legal amendment, quarterly dividends too can be set up so that the dividend amount is decided first and the record date afterward. You need to check the dates company by company in the articles and disclosures.
- In the 'Key dividend indicators' of a real filing, if earnings fall sharply but the dividend is held, the payout ratio jumps. The payout ratio is a number created together by the company's 'intent' and that year's 'earnings'.
You can now calculate ROE, P/B and the payout ratio. But is Robin Bakery's ROE of 20% high? Can a bank and a semiconductor company be measured with the same yardstick? In the next lesson you learn why you should compare within the same industry and how to read industry averages.
Quiz5-question quiz
Pick an answer and it's graded right away with an explanation.
Q1. With Robin Bakery's (fictional) net income of KRW 1.2 billion, total dividends of KRW 300 million, 2 million shares and a stock price of KRW 9,000, which is correct?
KRW 300 million ÷ KRW 1.2 billion = 25%, KRW 300 million ÷ 2 million shares = KRW 150, and 150 ÷ 9,000 ≈ 1.67%. KRW 600 is EPS, and 6.7% is the earnings yield (1 ÷ P/E).
Q2. Dividend per share is unchanged but the stock price fell from KRW 9,000 to KRW 6,000. What happens to the dividend yield?
Dividend yield = dividend per share ÷ stock price, so it rises when the stock price falls. 150 ÷ 6,000 = 2.5%. That is why you need to separate whether a high dividend yield comes from a bigger dividend or from a falling stock price.
Q3. Which numbers should you compare first to see whether a dividend can continue?
Dividends are paid in cash, so first check whether total dividends fit within FCF. Robin Bakery comfortably covers its KRW 300 million dividend with KRW 1 billion of FCF.
Q4. What was the core of the dividend procedure improvement announced by the Financial Services Commission and the Ministry of Justice in January 2023?
'Set the dividend amount first, the record date afterward' lets investors see the dividend amount before investing. Quarterly dividends became possible in the same way through the December 2024 amendment of the Financial Investment Services and Capital Markets Act. Actual application varies by company articles.
Q5. A company's total dividend was the same for three years, but its payout ratio swung from 17.9% → 67.8% → 29.2%. What is the most fitting reason?
Payout ratio = total dividends ÷ net income. A company that keeps its dividend steady sees its payout ratio rise in bad earnings years and fall in good ones.
NextTerms · Next lesson · Related tools
Total cash dividends ÷ net income attributable to owners of the parent. It shows what percentage of net income was paid out as dividends. Even if the dividend stays the same, it rises when earnings fall.
Dividend per share (DPS)Dividend Per ShareTotal dividends divided by the number of shares (excluding treasury stock): the dividend one share receives. Common and preferred shares may be set separately.
Dividend yieldDividend yieldDividend per share ÷ stock price. It shows what percentage of your investment the year's dividend is if you buy at today's price. It also rises when the stock price falls, so separate out the reasons.
Retained earningsRetained earningsThe portion of the net income a company has earned that has been kept rather than paid out as dividends and the like. It is shown within equity on the balance sheet.
Profit attributable to owners of the parentProfit attributable to owners of the parentThe share of consolidated net income that goes to the parent company's shareholders. It is the figure after subtracting other shareholders' share of subsidiaries (non-controlling interest), and it is used to calculate EPS.
EPSEarnings Per ShareNet income ÷ number of shares outstanding. The profit one share earned in a year.
BPS (Book value Per Share)Book value Per ShareThe company's net assets (assets − liabilities) divided by the number of shares outstanding. Dividing the share price by BPS gives PBR.
Dividend record dateDividend record dateThe day that determines which shareholders receive the dividend. After the 2023 dividend procedure improvement, year-end dividends can set the record date after the dividend amount is decided, depending on the company's articles, and quarterly dividends became possible in the same way through the 2024 amendment of the Financial Investment Services and Capital Markets Act.
Quarterly dividendQuarterly dividendA dividend a listed company pays each quarter by board resolution, in addition to the year-end dividend. To see the full year's total dividends, add the quarterly and year-end dividends together.
Dividend income tax (15.4%)Dividend income taxThe tax withheld on dividends from Korean stocks: 14% income tax plus 1.4% local income tax, totaling 15.4%. If financial income such as interest and dividends exceeds KRW 20 million a year, the excess is taxed comprehensively.
Separate taxation on high-dividend stocksSeparate taxation on high-dividend stocksA special provision, for payments from January 1, 2026 through income attributable to 2028, that lets dividends from qualifying high-dividend listed companies be taxed separately at 14–30% instead of being added to comprehensive income (Restriction of Special Taxation Act, amended December 2025). It covers companies that did not cut their dividend from the previous year and have a payout ratio of at least 40%, or at least 25% with a dividend increase of 10% or more.
Dividend section of the annual reportDividend section of the annual reportA section of 'III. Financial Matters' in the annual report that states the dividend policy, how the record date is handled (predictability), the key dividend indicators for three years (payout ratio, dividend yield, dividend per share), and the dividend history.
Annual general meetingAnnual general meetingA shareholders' meeting held once a year to decide matters such as approving the financial statements, electing directors and dividends. Most listed companies with a December fiscal year-end hold it in March.
Treasury stockTreasury stockThe company's own shares that it has bought and holds. It is recorded as a deduction from equity.
Corporate Value-up ProgramCorporate Value-up ProgramA government plan announced in February 2024 to support improving corporate value. It encourages listed companies to disclose plans to improve P/B and ROE, and publishes comparisons of P/B, P/E and ROE by market.
Share cancellationShare cancellationThe company eliminates the shares it bought back, reducing the number of shares outstanding. Even with the same net income, the share count falls and EPS rises.
Put what you learned to use right away
Dividend Reinvestment Calculator→Dividend Paycheck Planner→Comprehensive Financial Income Tax and Health Insurance Checker→This is educational material and not investment solicitation. There is no guarantee that past relationships will repeat in the future.