When computing the dividend payout ratio, net income is divided by the common stock dividends.

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The statement provided in the input question is incorrect. When computing the dividend payout ratio, the correct formula is:Dividend Payout Ratio = (Dividends Paid to Common Shareholders / Net Income) x 100
Here, the dividends paid to common shareholders are divided by the net income, not the other way around. The dividend payout ratio is a financial metric that shows the percentage of a company's net income that is distributed to its shareholders in the form of dividends. It is an indicator of how much money a company is returning to shareholders versus how much it is keeping on hand to reinvest in growth, pay off debt, or add to cash reserves.
To clarify, the net income is the profit a company has earned during a period after all expenses, taxes, and costs have been subtracted from total revenue. The dividends paid to common shareholders are the portion of this net income that is allocated to be distributed to the owners of common shares.
The dividend payout ratio can be expressed as a percentage and is calculated by taking the total dividends paid to common shareholders and dividing it by the total net income of the company, then multiplying the result by 100 to get a percentage. A higher dividend payout ratio indicates that a company is paying out a larger portion of its net income as dividends, while a lower ratio suggests that the company is retaining more earnings for growth.

When Computing the Dividend Payout Ratio, Net Income Is Divided