Login | May 19, 2026
Payout Ratios and 8-Ks
Motley Fool
Published: May 19, 2026
Q. What's a payout ratio? -- F.J., Winona, Minnesota
A. It's the percentage of a company's earnings (net income) that's paid out to shareholders in the form of dividends. For example, Coca-Cola's earnings per share (EPS) over the past year were recently $3.04, and its annual dividend per share was $2.12 ($0.53 per quarter). Divide $2.12 by $3.04 and you'll get a payout ratio of around 0.70, or 70%.
A payout ratio above 100% suggests that a company is paying out more than it's earning, which is not sustainable over the long run. (Accounting practices in some industries, such as utilities or telecommunications, can keep payout ratios high but less worrisome.)
A high payout ratio -- say, 80%, 90% or more -- gives a company little flexibility in how it can use its cash. That can be OK for big, established companies that don't need to reinvest much in their businesses. A low payout ratio reflects much more room for dividend increases.
A very steep payout ratio is a red flag, as such companies may have to reduce their dividend. To see stocks we like, dividend payers and nonpayers alike, check out our articles at Fool.com and our investor services at Fool.com/services.
Q. What's an 8-K report? -- R.G., Dayton, Ohio
A. The Securities and Exchange Commission requires publicly traded companies to release certain financial reports quarterly. If something noteworthy happens between those reports that may affect the company's health or performance, an 8-K, or "current report," must be filed to keep shareholders informed. Events warranting an 8-K include a bankruptcy filing, a completed merger, a change in top leadership, layoffs or plant closures, among others. You can look up SEC filings at SEC.gov.
Fool's School
Understanding Private Equity
The most familiar way to invest in companies is through the stock market, where big and small investors can buy shares of publicly traded businesses. Another way is via private equity firms that bypass the public markets.
In a nutshell, private equity firms typically raise money from institutions and wealthy investors and then buy (or help finance) private or public companies. (When public companies are bought, they are generally taken private, meaning shares are no longer publicly available.) The private equity firm will usually then manage the acquired companies, aiming to increase their value and eventually sell them for a profit. Sometimes that involves breaking up a company and selling it in pieces; sometimes aggressive cost-cutting involves sizable layoffs. It's also common for private equity firms to take on debt to acquire companies ("leveraged buyouts"), and the acquirees are often saddled with much of that debt.
Perhaps not surprisingly, there's a dark side to private equity. For example, a 2026 report from the NYU Stern Center for Business and Human Rights titled "Private Equity and Healthcare: Balancing Profit With Wellness" noted, "Private equity firms have invested more than $1 trillion in debt-financed healthcare deals over the last decade -- often at the expense of patient care."
Meanwhile, private equity firms have also been investing in real estate. An NPR report said, "private equity was outbidding aspiring homeowners, making it more expensive to buy a home and pocketing the appreciation in home values." And CNBC has reported, "Real estate investors, both individual and institutional, bought one-third of all single-family residential properties sold in the second quarter of 2025."
A little digging online will turn up more criticism of private equity, with many critics concluding that it does more harm than good. Supporters argue that it helps struggling companies survive and, often, avoid bankruptcy. The largest private equity firms include Blackstone, KKR (Kohlberg Kravis Roberts), The Carlyle Group, Apollo Global Management and Brookfield Asset Management. (Some of these are themselves publicly traded companies.)
My Dumbest Investment
Missed Out on Bitcoin
My most regrettable investing moves were (1) not taking Bitcoin seriously in 2013 and (2) not going all in on Tesla early in the COVID-19 era. -- L.P., online
The Fool responds: Most experienced investors will have some investments they regret making and some investments they regret not making. Yours fall in the second group. But don't kick yourself too hard, because you couldn't have known for sure how these investments would have performed.
Bitcoin debuted in 2009 with a value near zero, and it stayed valued at under $0.30 per coin through 2010. In 2013, it surged from $13 to more than $700. More recently a single bitcoin was priced at over $75,000. It could keep surging, but it's a complicated security; you should learn a lot about it -- and its risks -- before investing.
Tesla also skyrocketed, with shares rising 743% in 2020 and hitting a price-to-earnings (P/E) ratio above 1,300. Arguably, shares got way ahead of themselves, later falling by 65% in 2022.
It's close to impossible to catch investments just before meteoric rises. Instead, seek promising, growing investments available at reasonable prices, and aim to hang on through thick and thin, as long as they hold your confidence.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish Trivia
Name That Company
I trace my roots back to 1936, when one of my founders bought some vending machines dispensing peanuts. I grew into a major vending business before joining with another in 1959, forming Automatic Retailers of America. Today, based in Philadelphia, I'm a food service giant, with a recent market value topping $12 billion. I provide food and/or facilities management for thousands of clients including schools, healthcare facilities, sports arenas, national parks and prisons. I employ over 275,000 people, and I serve billions of meals and more than a billion cups of coffee annually in 16 countries. Who am I?
Last Week's Trivia Answer
I trace my roots back to 1971, when my first location, with a name inspired by "Moby-Dick," opened in Seattle's Pike Place Market. In 1982, I hired an executive who left in 1985 to open coffee and espresso bars -- and who (with other investors) bought me in 1987. I had 33 stores in 1988, 425 in 1994 and 1,886 in 1998. Today, with a recent market value of $112 billion, I boast more than 41,000 company-operated and licensed coffeehouses. I introduced lattes in 1984 and pumpkin-spice lattes in 2004. My magazine Joe, launched in 1999, bombed. Who am I? (Answer: Starbucks)
The Motley Fool Take
Consider Broadcom
Semiconductor chips are big business, present even in today's refrigerators and automobiles. And as artificial intelligence (AI) infrastructure spending continues to grow, Broadcom (Nasdaq: AVGO) benefits from selling high-performance networking and customized AI chips for data centers.
Analysts forecast annualized earnings growth of about 41% for Broadcom over the next few years. That could support strong returns for the stock, as its forward-looking price-to-earnings (P/E) ratio was recently just 35.
A risk for Broadcom is that data center spending can be cyclical. Budgets can pause or dip, and those slowdowns could send the stock downward.
But a significant part of its business isn't dependent on AI -- such as infrastructure software and general-purpose semiconductor solutions. Broadcom provides non-AI connectivity and storage for wireless, broadband, industrial automation and networking, as well as non-AI infrastructure software for cybersecurity and enterprise software.
Nothing is guaranteed in the stock market. For Broadcom to meet expectations, AI spending will have to continue to grow rapidly, and the company must deliver on its innovation roadmap. However, if we're still in the early innings of a multiyear AI infrastructure build-out, this stock could deliver huge long-term gains. (The Motley Fool owns shares of and recommends Broadcom.)
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