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. Can a company declare a dividend that exceeds its earnings per share?

    Yes, it can. In fact, many well-known Fortune 500 companies have paid dividends in years where they posted negative earnings ... Read Answer >>
  2. How can I access a company's earnings report?

    Find out how to access the quarterly and annual earnings reports for publicly traded companies, and even how to listen in ... Read Answer >>
  3. When is earnings season?

    Earnings season is the period of time during which a large number of publicly traded companies release their quarterly earning ... Read Answer >>
  4. Since stockholders are entitled to a company's assets and earnings, can a stockholder ...

    When buying stock in a company, an investor becomes a part owner of that company. In addition to possessing the small degree ... Read Answer >>
  5. Why do some companies pay a dividend, while other companies do not?

    Dividends are corporate earnings that companies pass on to their shareholders. There are a number of reasons why a corporation ... Read Answer >>
  6. What can I learn about a company by studying its earnings report?

    Find out how to review an earnings report by looking for key information about cash flow and margins, and discover the importance ... Read Answer >>
Related Articles
  1. Insurance

    Everything Investors Need To Know About Earnings

    We go over the concepts behind the excitement over the most important figure in the stock market.
  2. Fundamental Analysis

    Is It Time To End Quarterly Earnings Reporting?

    The chorus for removing the quarterly earnings requirement for companies is growing louder. We examine the pros and cons of the issue.
  3. Investing

    How to Use Earnings Season to Make Better Decisions

    Earnings season reflects the state of the stock market, but also demonstrates how the overall economy is performing.
  4. Active Trading

    Value Investing: Finding Undervalued Stocks

    There are two basic steps to finding undervalued stocks: developing a rough list of stocks you want to investigate further because they meet your basic screening criteria, then doing a more in-depth ...
  5. Investing Basics

    How Dividends Affect Stock Prices

    Find out how dividends affect the price of the underlying stock, the role of market psychology and how to predict price changes after dividend declaration.
  6. Investing Basics

    Stocks Basics: What Causes Stock Prices To Change?

    Stock prices change every day as a result of market forces. By this we mean that share prices change because of supply and demand. If more people want to buy a stock (demand) than sell it (supply), ...
  7. Economics

    What are Earnings?

    The amount of profit that a company produces during a specific period, which is usually defined as a quarter (three calendar months) or a year.
  8. Investing

    Top 9 Questions Investors Should Ask Management

    Find out how to get the answers you want without getting the company line.
  9. Economics

    Earnings Forecasts: A Primer

    Learn how this key metric is calculated and how it is used to judge market performance.
  10. Forex Education

    Dividend Yield

    Investing is a complex and often daunting experience, these equations are actually quite simple.
RELATED TERMS
  1. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. ...
  2. Accounting Earnings

    The amount of money a company has earned during a given period, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Earnings Surprise

    Occurs when a company's reported quarterly or annual profits ...
  5. Rolling EPS

    A measure of a company's earnings per share based on the previous ...
  6. Dividend

    A distribution of a portion of a company's earnings, decided ...

You May Also Like

Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center