Retention Ratio (Plowback Ratio) Calculator

Income & Dividends

Updated Oct 2026 • Has calculator

The proportion of net income reinvested back into the business rather than paid as dividends.

Calculate Retention Ratio

Retention Ratio Formula

Retention Ratio = (Net Income − Dividends) ÷ Net Income = 1 − Payout Ratio

Dividend Payout Ratio

Dividends ÷ Net Income × 100 (e.g. 24.70 for 24.70%)

Retention Ratio

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Not investment advice.

What is Retention Ratio?

The Retention Ratio (also called the Plowback Ratio) is the complement of the Payout Ratio — it measures the share of net income kept by the company for reinvestment rather than distributed as dividends. A retention ratio of 0.75 means 75% of earnings are reinvested. High retention ratios are typical of growth companies that need capital to fund expansion. Together with ROE, the retention ratio drives the Sustainable Growth Rate, making it a fundamental input in dividend discount models.

Worked Example

FY2024

Step 1 Payout ratio (dividends ÷ net income): 24.70%

Step 2 Retention Ratio = 1 − 24.70% = 75.30%

Step 3 → Microsoft retains 75% of its earnings for share buybacks, R&D, acquisitions, and operations

Source: Microsoft 10-K FY2024 (2024-07-30)

How to Interpret Retention Ratio

< 25

Low retention — income-focused, most profits distributed

25 – 50

Balanced — moderate reinvestment and income distribution

50 – 80

High — growth-focused, significant capital reinvestment

> 80

Very High — nearly all earnings reinvested, minimal dividend

📚 Income Investing — Complete the path

Sources