# Reinvestment Rate and Retention Rate

The share of earnings put back into the business instead of paid out.

## Definition

Reinvestment rate is the money spent on growth in a year, as a share of the year's operating profit after tax. We show the median of up to the last ten years so one big acquisition does not set the number. Banks and insurers show the retention rate instead: the share of net income not paid out as dividends or buybacks.

## Formula

Reinvestment rate = (net capex + acquisitions + increase in working capital) ÷ NOPAT. Retention rate = 1 − (dividends + buybacks) ÷ net income

## Why it matters

A high rate with a high return on capital is how a company compounds. A high rate with a poor return burns value.

## How Standard Equity uses it

REITs divide property purchases and capex by FFO. Rates above 100% are possible (a company reinvesting more than it earns). A year with no positive profit is left out, since a rate on a loss means nothing.

## The metric

| Category | Breakdown Tables |
| -------- | ---------------- |
| Unit     | %                |

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