Retention Ratio Calculator — Plowback Ratio
The retention ratio (also called the plowback ratio) tells you what fraction of a company's net income is kept and reinvested rather than distributed to shareholders as dividends. Enter net income and dividends paid to see the split instantly.
Percentage of net income reinvested in the business (plowback ratio)
70 %
retainedRetained earnings
70%
Dividends paid
30%
- 1
Retained earnings
1,000,000 − 300,000 = 700,000The portion of net income not distributed as dividends. - 2
Retention Ratio
700,000 ÷ 1,000,000 × 100 = 70
How does this calculator work?
Retention Ratio = (Net Income − Dividends) ÷ Net Income. A ratio of 0.70 means the company reinvests 70% of earnings and pays out 30% as dividends. High retention signals growth focus; low retention signals shareholder income focus. It adds to 1 with the payout ratio.
Formula
How this is calculated
When a company earns a profit it has two basic choices: pay it to shareholders as a dividend or reinvest it for future growth. The retention ratio captures that decision in a single number. A ratio of 0.70 means 70 cents of every dollar earned stays in the business; the remaining 30 cents leave as dividends, which is the payout ratio.
Growth-oriented companies (technology, biotech) tend to retain most or all of their earnings — sometimes showing a ratio near 1 — because they expect internal projects to earn a higher return than shareholders could get elsewhere. Mature, cash-generating businesses (utilities, consumer staples) often have lower retention ratios and higher dividends because their reinvestment opportunities are limited.
The ratio feeds directly into the sustainable growth rate (SGR = Retention Ratio × Return on Equity), which estimates how fast a company can grow without raising new capital. A high retention ratio is only beneficial when the reinvested capital earns a return above the cost of equity — otherwise returning it to shareholders would be more value-creating.
Frequently asked questions
There is no universal "good" level — it depends on the company's growth opportunities and capital needs. High-growth firms often retain 80–100% of earnings; mature dividend-paying businesses may retain 30–50%. Compare within the same industry and weigh it against the return on equity the company achieves on retained capital.
The two ratios sum to 1 (or 100%). If the retention ratio is 0.65, the payout ratio is 0.35. They simply split net income into the portion reinvested and the portion distributed.
Yes. If a company pays dividends larger than its net income (often financed by cash reserves or debt), the retention ratio is negative. Some companies also repurchase shares from reserves when earnings are temporarily low, which can push the ratio above 1. Both situations are unsustainable over the long term.
Also known as
TG we-Calculate Editorial Team. (2026). Retention Ratio Calculator — Plowback Ratio [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/retention-ratio-calculator
TG we-Calculate Editorial Team. "Retention Ratio Calculator — Plowback Ratio." TG we-Calculate. 2026. https://we-calculate.com/calculator/retention-ratio-calculator.
TG we-Calculate Editorial Team, "Retention Ratio Calculator — Plowback Ratio," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/retention-ratio-calculator
@misc{wecalculate_retention_ratio_calculator, title = {Retention Ratio Calculator — Plowback Ratio}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/retention-ratio-calculator}}, year = {2026}, note = {TG we-Calculate} }
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