Retention ratio

The retention ratio is the share of a company's earnings kept in the business rather than paid out as dividends: one minus the payout ratio, also called the plowback ratio.

ByHoang TruongUpdated July 11, 2026

See it move

Loading infographic...

A company reports earnings per share of €4.00 and pays an annual dividend of €1.20 per share. The payout ratio is €1.20 ÷ €4.00 = 30%, so the retention ratio is 1 − 0.30 = 70%: for every euro earned, the company keeps €0.70 and pays out €0.30.

Where it fits

SubjectCorporate FinanceCoreTopicDividend Policy & PayoutCore

The formula

LaTeX

b = 1 - \frac{DPS}{EPS}

Variables

$b$: Retention ratio (ratio)
$D P S$: Dividends per share (€ per share)
$E P S$: Earnings per share (€ per share)

Gives the fraction of each period's earnings kept in the business rather than paid out as dividends.

Check yourself

PracticeCORE

A company reports earnings per share of €6.00 and pays an annual dividend of €2.10 per share. What is the company's retention ratio?

Select an answer to check your understanding.