Earnings Yield
Earnings per share expressed as a percentage of the share price — the inverse of the price-to-earnings ratio.
Formula
Earnings Yield = Earnings per Share / Market Price per Share x 100 = 1 / P/E x 100
Unit
%
In depth
Expressing valuation as a yield lets equities be compared directly with bonds, which is the whole point: a 5% earnings yield against a 7% government bond yield frames the choice in one line. It handles the extremes better than the P/E, because a stock at 200 times earnings shows a 0.5% yield rather than a number that has to be interpreted. The critical difference from dividend yield is that earnings yield counts all profit, including the part retained in the business, while dividend yield counts only cash actually paid out. Confusing the two overstates what an investor receives in hand.
Worked example
EPS of ₹3.00 on a price of ₹60 gives an earnings yield of 3 / 60 x 100 = 5%, the reciprocal of the P/E of 20. If the company pays ₹1.20 of that as dividend, the dividend yield is 1.20 / 60 = 2% — the cash half of the same 5%.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Earnings Yield” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.