The payout ratio divides dividends by net income. Forty per cent leaves ample room for reinvestment and for a bad year; ninety per cent means almost all profit is leaving the company and the dividend depends on nothing going wrong.
Above one hundred per cent the company is paying out more than it earns, funding the difference from cash reserves or borrowing. That can survive a weak quarter or two. Sustained, it ends in a cut.
Compute it against free cash flow as well as earnings. Accounting profit can be depressed by non-cash charges while the cash to pay the dividend is comfortably there, and for capital-heavy businesses the reverse is just as common.