Retention Ratio Calculator

About this calculator

The retention ratio — also called the plowback ratio — measures how much of a company's net income it keeps and reinvests rather than paying out as dividends: retention ratio = (net income − dividends) / net income = 1 − payout ratio. A company retaining 70% of earnings is funding growth (R&D, expansion, debt paydown) with internal cash rather than distributing it to shareholders.

Equity analysts and portfolio managers use the retention ratio inside the sustainable growth rate formula (g = ROE × retention ratio) to estimate how fast a company can grow without external financing, and to distinguish growth-oriented stocks (high retention, low or no dividend) from income-oriented ones (low retention, high payout). Finance students meet it early in coverage of the dividend discount model.