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
-
Hargreaves Lansdown bumps up cash ISA with £25 cashback - does it beat the wider ISA market?
Just days before the end of the tax year, Hargreaves Lansdown has launched a £25 bonus for those who open a cash ISA on its savings platform. Does the bonus make it a competitive rate, and are you eligible for the cashback?
By Vaishali Varu Published
-
FCA targets finfluencers with new social media guidance
So-called finfluencers have been warned by the UK financial watchdog that they could face prosecution if they fail to follow new rules.
By Henry Sandercock Published