when comparing these two measures it s important to know that the dividend yield tells you what the simple rate of return is in the form of cash dividends to shareholders but the dividend payout ratio represents how much of a company s net earnings are paid out as dividends 
while the dividend yield is the more commonly known and scrutinized term many believe the dividend payout ratio is a better indicator of a company s ability to distribute dividends consistently in the future the dividend payout ratio is highly connected to a company s cash flow the dividend yield shows how much a company paid out in dividends a year as a percentage of the stock price it shows for a dollar spent on the stock how much you will yield in dividends the yield is presented as a percentage not as an actual dollar amount this makes it easier to see how much return per dollar invested the shareholder receives through dividends the yield is calculated as dividend yield annual dividends per share price per share begin aligned text dividend yield frac text annual dividends per share text price per share end aligned dividend yield price per shareannual dividends per share for example a company that paid 10 in annual dividends per share on a stock trading at 100 per share has a dividend yield of 10 you can also see that an increase in share price reduces the dividend yield percentage and vice versa for a price decline companies that make a profit at the end of a fiscal period can do several things with the profit they earn they can pay it to shareholders as dividends they can retain it to reinvest in the growth of its business or they can do both the portion of the profit that a company chooses to pay out to its shareholders can be measured with the payout ratio for example apple aapl has paid 0 87 per share in dividends over the trailing 12 months ttm as of jan 3 2022 1 apple s eps over the ttm has been as follows the ttm eps for apple is 5 67 as of jan 3 2022 thus its payout ratio is 15 3 or 0 87 divided by 5 67 