Earnings Yield

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Dictionary Says

Definition of 'Earnings Yield'

The earnings per share for the most recent 12-month period divided by the current market price per share. The earnings yield (which is the inverse of the P/E ratio) shows the percentage of each dollar invested in the stock that was earned by the company.

The earnings yield is used by many investment managers to determine optimal asset allocations.
Investopedia Says

Investopedia explains 'Earnings Yield'

Money managers often compare the earnings yield of a broad market index (such as the S&P 500) to prevailing interest rates, such as the current 10-year Treasury yield. If the earnings yield is less than the rate of the 10-year Treasury yield, stocks as a whole may be considered overvalued. If the earnings yield is higher, stocks may considered undervalued relative to bonds.

Economic theory suggests that investors in equities should demand an extra risk premium of several percentage points above prevailing risk-free rates (such as T-bills) in their earnings yield to compensate them for the higher risk of owning stocks over bonds and other asset classes.
Search results for

'Earnings Yield'

  • The Market's Primed For A Pullback - Investopedia.com

    http://financialedge.investopedia.com/financial-edge/0909/The-Markets-Primed-For-A-Pullback.aspx
    ... Earnings Yield Most investors understand what a P/E ratio is and how it is calculated,
    but few understand that its real significance can only be seen when it ...

  • Value Investing: Finding Undervalued Stocks | Investopedia

    http://www.investopedia.com/university/value-investing/value-investing3.asp
    ... Earnings Yield Earnings yield is simply the inverse of the earnings multiple..
    So a stock with an earnings multiple of 5 has an ...

  • How To Find P/E And PEG Ratios

    http://www.investopedia.com/articles/fundamental-analysis/09/price-to-earnings-and-growth-ratios.asp
    ... Earnings Yield The best way to understand the significance of the P/E ratio
    is to turn it upside down. If ... Earnings Yield vs. Bond ...

  • The Fed Model And Stock Valuation: What It Does And Does Not Tell ...

    http://www.investopedia.com/articles/03/112703.asp
    ... Remember, all the Fed Model is telling us is that when the forward earnings yield
    on the S&P 500 (how much you would earn per dollar paid) is less than the 10 ...

  • Breaking Down The Fed Model

    http://www.investopedia.com/articles/stocks/08/fed-model.asp
    ... The Fed Model is a valuation methodology that states there is a relationship between
    the forward earnings yield of the stock market (typically the S&P 500 index ...

  • Calculating The Equity Risk Premium

    http://www.investopedia.com/articles/04/020404.asp
    ... returns: Plugging into the Earnings Model The earnings-based model says
    that the expected return is equal to the earnings yield. ...

  • The Equity-Risk Premium: More Risk For Higher Returns

    http://www.investopedia.com/articles/04/012104.asp
    ... Earnings-Based Approach Another approach looks at the price-to-earnings (P/E) ratio
    and its reciprocal: the earnings yield (earnings per share รท stock price). ...

  • Four Stocks For The Industrial Complex

    http://stocks.investopedia.com/stock-analysis/2009/Four-Stocks-For-The-Industrial-Complex--AFP-FIX-BDK-WM1026.aspx
    ... Using Joel Greenblatt's two-pronged evaluation system: return on invested capital
    (ROIC) and earnings yield, you'll see that Comfort Systems has an ROIC of 35.6 ...

  • 3 Reasons To Own Magna International

    http://stocks.investopedia.com/stock-analysis/2011/3-Reasons-To-Own-Magna-International-MGA-ITW-CMI-PPG-LEA-BNS0816.aspx
    ... Graham suggested that investors find stocks whose earnings yield wax double the
    average yield on long-term AAA corporate bonds. That's about 10% today. ...

  • Coke Runs Into Rising Expectations

    http://stocks.investopedia.com/stock-analysis/2011/Coke-Runs-Into-Rising-Expectations-KO-PEP-KFT-SBUX-DPS-HANS0429.aspx
    ... grow. Coke's earnings yield is 5.4%, and its return on assets (ROA) is 9.3%,
    while Pepsi has a 7.5% earnings yield and an 11% ROA. ...

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