PDSnet Glossary

Term

Categories

Introductory Technical Fundamental Economics Opinion Sectors International Regulatory Other Markets

Versions

Name	synonyms = 1, variations = 2, abbreviations = 3

Publish: (0 = no, 1 = yes)

Definition

Earnings per share expressed as a percentage of the current market price of the share. For example, a company with 25 cents earnings per share and a market price of 250 cents would have an earnings yield of 10%. You should note that the earnings yield changes every day for listed companies as their share prices vary in the market. You should also understand that the earnings yield is the reciprocal of the price:earnings ratio. So in our example above that company would have a P:E ratio of 10 - (i.e. 250c divided by 25c). You can add a chart of any share's earnings yield to whatever share you are looking at on your software. Simply click the right mouse button anywhere in the chart and then select "yields" at the bottom of the menu and then "earnings yield" - the earnings yield chart will immediately be displayed in the bottom half of your screen. Consider the example of Standard Bank:
<figure class="container-fluid"><img class="img-responsive" style="display: block; margin: 0 auto; max-width: 100%;" src="/onlinecourse/img/glossary/standard-bank-earning-yield-def-1.jpg" alt="standard bank - earning yield def" />
<figcaption style="text-align: center;">Standard Bank (SBK) June 2016 to March 2018</figcaption>
</figure>
You will notice that as the price of Standard Bank's shares went up, so the earnings yield fell. This is to be expected because the earnings yield is found by dividing the earnings by the current share price. The earnings will only change twice a year (when the interim and final accounts are produced) but the share price can change every day. You should be aware that overseas investors are not usually familiar with the term earnings yield. They generally refer to the share's price:earnings ratio which they also call the share's "multiple". The term "earnings yield" is used mostly here in South Africa.

Edit Glossary Term