If I have a number of stock shares and that company reports earnings of X amount per share, do I receive those earnings?

By Investopedia Staff AAA
A:

Simply?

Yes and no.

Part of the answer to your question is "no" because when a company reports $X of earnings per share in a quarter, the company is not declaring a dividend to its investors - it is publicizing how profitable it was for the last quarter. If it reported a losing quarter (negative EPS), the company naturally wouldn't request that you pay it back some money. Similarly, it won't pay you when it reports a profitable quarter. The only time you receive money directly from the company is through a dividend. (To learn more about dividends, see How And Why Do Companies Pay Dividends?)

Also, part of the answer to your question is "yes" because a company's stock performance is determined by different factors such as supply and demand, investor perception and market sentiment - which are, at least in part, affected by earnings. For this reason, when a company reports a certain amount of earnings per quarter, the stocks that you already own should have risen for the increase in earnings (according to the efficient market hypothesis). In other words, a company reporting higher earnings means that it is now worth more, which means the market will realize the higher value in the price of the stock, indirectly increasing your stock's worth.

For more on earnings, see our article Everything You Need To Know About Earnings.

RELATED FAQS

  1. How do I use Positive Volume Index (PVI) for creating a forex trading strategy?

    Understand the basics of the positive volume index and how investors in the forex markets use this contrarian indicator to ...
  2. How can I use alpha in conjunction with the Treynor Ratio?

    Learn about alpha and the Treynor ratio and how these metrics are used to assess investment strategy by comparing portfolio ...
  3. How is standard deviation used to determine risk?

    Understand the basics of calculation and interpretation of standard deviation and how it is used to measure risk in the investment ...
  4. How do I calculate yield in Excel?

    Learn about yield as it pertains to bonds and how to calculate this prospective valuation of an investment's total return ...
RELATED TERMS
  1. Bid Wanted

    An announcement by an investor who holds a security that he or ...
  2. Hindsight Bias

    A psychological phenomenon in which past events seem to be more ...
  3. Paper Trade

    Using simulated trading to practice buying and selling securities ...
  4. Financial Exposure

    The amount that one stands to lose in an investment. For example, ...
  5. Bid And Asked

    A two-way price quotation that indicates the best price at which ...
  6. Compound Net Annual Rate - CNAR

    The return on an investment after taking tax implications into ...

You May Also Like

Related Articles
  1. Investing News

    Looking To Invest In U.S Start-Ups? ...

  2. Investing Basics

    How a Stock Buyback Works: MasterCard

  3. Trading Strategies

    Consider The Season On Trading Day

  4. Trading Strategies

    Harness Elliot Wave principles To Tap ...

  5. Economics

    Profiting From China's Breakout: The ...

Trading Center