What Is the Price/Earnings to Growth and Dividend Yield?
The price/earnings to growth and dividend yield (PEGY) ratio is a variation of the price-to-earnings growth (PEG) ratio where a stock's value is further evaluated by its projected earnings growth rate and dividend yield. The PEGY ratio takes the PEG ratio one step further by adding dividend yield into the equation. This allows companies mature, lower growth companies who pay dividends or growth companies who may pay a small dividend to not be as punished by the PEGY ratio as they would with the PEG ratio which does not consider dividends. Both the PEGY and the PEG ratio are evolutions of the P/E ratio which does not take the potential for future earnings growth or dividend payments into consideration when formulating the ratio.
The PEGy ratio is calculated as:
Understanding Price/Earnings to Growth and Dividend Yield (PEGY Ratio)
The PEGY ratio is an evolved version of the P/E and PEG ratio that allows for a stock's dividend payments to be factored into the equation. For stocks that pay a substantial dividend, the PEGY may be an even better measure than PEG. As with the PEG, keep in mind the numbers are based on future projections and, therefore, aren't guaranteed to be accurate. When calculating any of these ratios, it is always a good idea to use only operating and recurring income in the calculation of earnings, to use a lower consensus estimate for the growth rate, and to use projected future dividends as opposed to current dividends.
PEGY is pronounced the same way as "peggy."