Earnings yield
The earnings yield is a firm's earnings per share for the most recent 12 months divided by the share price - effectively the opposite of the p/e ratio.
The earnings yield is a firm's earnings per share for the most recent 12 months divided by the share price - effectively the opposite of the p/e ratio. The result is expressed as a percentage and represents the percentage return or yield an investor would receive if all the firm's earnings were to be paid out in dividends.
Looking at the earnings yield rather than the dividend yield as a measure of returns tends to be more popular during periods when dividend payouts are low. The idea is that retained earnings, once re-invested, generate additional earnings, increasing the likelihood and size of future dividends. Hence even undistributed earnings are considered to provide a return, or yield.
See Tim Bennett's video tutorial: Beginner's guide to investing: earnings per share.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Meta’s AI splurge rattles investors
Meta's decision to join the AI race is driving investors away
By Dr Matthew Partridge Published
-
Is it a good time to invest in the UK?
Temple Bar Investment Trust is a diversified bet on British equities and looks excellent value, says Max King
By Max King Published