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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Fool contributor Daniel Sparks has no position in any stocks mentioned. The Motley Fool recommends Apple and Waste Management. The Motley Fool owns shares of Apple, Microsoft, and Waste Management. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.