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Last update: 15/10/2024
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.
In August 2024, we announced a new share buyback programme worth EUR 1.525 billion (some 25% of the Group’s underlying profit for the first half of the year). The programme, which will run until 3 January 2025, is part of the first tranche of annual remuneration for our 3.5 million-plus shareholders.
On 24 September, the board of directors announced the amount of the interim cash dividend charged against the 2024 results: 10 euro cents per share, some 23% up on the 2023 dividend.
Total shareholder remuneration against the 2023 results was EUR 5.552 billion (some 50% of the Group’s underlying profit for 2023), split almost equally between a cash dividend and share buyback. That’s the bank’s highest payout since 2014.
Santander continues to achieve sustainable and profitable growth. A 23% increase in our cash dividend per share charged against the 2024 results is a shining example of the strength of our business model and strategy. We will continue to create shareholder value and expect to meet our 2024 targets, which we recently increased. That will mean over 6 billion euros in shareholder remuneration against the 2024 results. What’s more, after we pay this year’s interim dividend, we’ll have bought back over 12% of our shares since 2021.
