Last update: 28/02/2024

Shareholders and investors need to understand financial concepts about listed companies. One that really interests them is the “payout”: the share of profits that a company “pays out” to them. Below is everything you need to know about payouts.

A payout is the share of profits that a listed company will pay its shareholders. If the payout set out in the company’s shareholder remuneration policy is 50%, the company will distribute half of its net profits among its shareholders. 

If that policy says the 50% payout should be split between a cash dividend and share buybacks, the formula is:

Payout = (cash dividend + share buyback)/underlying net profit. The payout is expressed as a percentage. 

Remember, a dividend is cash paid to shareholders for their share in the company's profits. A share buyback and the subsequent cancellation of shares are when the company “buys back” its own shares to reduce outstanding share capital and increase its share price.

Why do payouts matter to shareholders?

The payout is an indicator that influences an investor’s decision to buy shares in a company. It shows what share of the company’s profits will be paid to shareholders, whether in a cash dividend, a share buyback or both.

What does this mean? 

A payout policy can also help attract more long-term investment in a listed company. But the company must find the right balance between shareholder returns and reinvesting in its own long-term growth. A payout gives substance to shareholder remuneration policies, which influence investors’ decisions.

Santander’s payout 

At our Investor Day in February 2023, we announced our goal to increase shareholder remuneration for 2023-2025 from almost 40% of net profits to about 50%, split almost evenly between a cash dividend and share buybacks. 

To achieve that goal, our board will submit the following to vote at our annual general meeting (AGM) on 22 March 2024:

• A final cash dividend of 9.50 euro cents per share, to be paid in May 2024. 
• A new buyback programme for an amount of EUR 1.459 billion, which already has regulatory approval.

When the dividend is paid and the buyback programme ends, total shareholder remuneration for 2023 will be EUR 5.538 billion (some 50% of the Group’s underlying profit for 2023), split almost equally between a EUR 2.769 billion cash dividend and share buybacks worth EUR 2.769 billion.