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Earnings Yield Calculator

Enter earnings per share and the share price to find the earnings yield.

How it is calculated

Earnings yield is earnings per share divided by the share price: yield % = EPS ÷ price × 100. The tool also gives the P/E ratio, P/E = price ÷ EPS, which is simply the reverse (yield = 100 ÷ P/E), and repeats your EPS as a dollar amount.

EPS and price must be in the same currency, and EPS should cover the period you care about, usually the last twelve months or an annual forecast. Price must be above zero, otherwise no result appears. EPS may be negative, in which case the yield is negative. The P/E is only shown when EPS is positive; with zero or negative EPS it appears as a dash, because a ratio is undefined or meaningless there. The yield is not a dividend you receive: it is the profit the company earned per dollar of share price.

Worked example

A company earned $3.85 per share and its stock trades at $72.40.

Earnings yield = 3.85 ÷ 72.40 × 100 = 5.32%. The P/E ratio is 72.40 ÷ 3.85 = 18.81, and 100 ÷ 18.81 gives the same 5.32%. Compared with a bond paying, say, 4%, the stock's earnings relative to price are higher, but those earnings are not guaranteed.

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Common mistakes

  • Treating earnings yield as a dividend yield. It counts all profit, whether or not it is paid out to shareholders.
  • Entering the earnings of the whole company instead of earnings per share, or mixing a price in one currency with EPS in another.
  • Using a quarter's EPS as if it were annual. A quarterly EPS gives a yield about a quarter of the annual figure.
  • Expecting a P/E for a loss-making or zero-earnings stock. With EPS of 0 or below the tool shows a dash for P/E, while the yield is still computed (and is negative for a loss).
  • Comparing the yield with a bond rate as if risk were the same. Earnings can fall, while a bond's coupon is fixed.

Sources

About this calculator

Earnings yield flips the familiar price-to-earnings ratio upside down: instead of price divided by earnings, it is earnings per share divided by share price, expressed as a percentage. A stock trading at a P/E of 20 has an earnings yield of 5%, meaning that, in theory, for every dollar invested the company generates five cents of earnings. Because it comes out as a percentage rather than a multiple, it can be compared directly against interest rates on bonds or savings accounts.

Analysts use earnings yield in models like the so-called Fed Model, which compares stock market earnings yield against the yield on long-term government bonds to gauge whether equities look cheap or expensive relative to fixed income. A rising earnings yield relative to bond yields suggests stocks are becoming more attractive on a value basis, while a falling one suggests the opposite. Earnings per share divided by the share price gives the earnings yield, the inverse of the P/E ratio, ready to compare with bond yields.

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Comments (1)

  • Editorial team

    Earnings yield is handy because it can sit beside a bond yield: 4 of earnings on a share priced at 50 is 8 percent, a P/E of 12.5. But earnings are not paid out to you, and one-off gains or write-offs inside the EPS can distort the figure, so check what it includes. Which EPS do you feed in: trailing twelve months, or a forecast?

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