Charles H. Dow discusses reasonable dividend payout ratio:
“Common stocks can hardly be expected to sell up to the same level of return of the greater insecurity of dividends. Union Pacific may earn 5% or more on the common stock, but it does not follow that 5% will be paid, and if it were paid, the price would still reflect the knowledge, that whenever earnings decrease the loss would fall upon the common stock. It would perhaps be fair to reason that a common stock on which 5% was being earned would sell at something like a 3% level of value (Dow, Charles H. Wall Street Journal. Review and Outlook. March 27, 1900).”
Who was Charles H. Dow?
“Charles Henry Dow was an American journalist who co-founded Dow Jones & Company with Edward Jones and Charles Bergstresser. Dow also founded The Wall Street Journal, which has become one of the most respected financial publications in the world. He also invented the Dow Jones Industrial Average as part of his research into market movements. He developed a series of principles for understanding and analyzing market behavior which later became known as Dow theory, the groundwork for technical analysis (source: Wikipedia.org).”