What Is the Earnings Yield?

Chris at Hauseit® (https://www.hauseit.com) goes over the question: What is the earnings yield?Show more

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The earnings yield of a stock (or stock index) is the earnings per share (EPS) divided by the price.

So in the example of the S&P 500 index, the earnings yield would typically be the forward year expected earnings for the index as an aggregate (i.e. let's say $200), divided by the index price, let's say 4,000 to use round numbers.

In this example, then earnings yield would be 200 divided by 4,000, which would be 5%.

The inverse of that, 4,000 divided by 200, would be 20 and that's called the P/E (price / earnings) ratio which is more commonly used.

We explore this mystery and explain further in the following video.
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