The payout ratio is an excellent tool for dividend investors. Without it, it's tough to judge how sustainable a company's dividend is. Though a lower payout ratio is always better than a high payout ratio, some companies can easily cope with higher ratios than others. In the video below, Fool contributor Daniel Sparks looks at Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT), and Waste Management (NYSE: WM), illustrating how the ratio deserves careful attention during analysis.
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