Glossary · Stocks and markets
Earnings yield
The earnings yield is a company’s yearly earnings per share divided by its share price: the P/E ratio turned upside down, as a percent.
Also called: E/P, earnings-price ratio, inverse P/E
Last 12 months’ earnings ÷ price, Jun 2026. The 10-year Treasury rate that month: 4.5%.
In plain words
A lemonade stand costs $1,000 and earns $80 a year. Its earnings yield is $80 ÷ $1,000 = 8%: what the business earns on the price you paid, before any of it is paid out to you.
It is simply the P/E ratio flipped. A P/E of 25 means paying $25 for $1 of yearly profit, and $1 ÷ $25 is a 4% earnings yield. A high P/E is a low earnings yield, and the other way round.
Written as a percent, it is easy to set against interest rates. The S&P 500’s earnings yield was 4.0% in Jun 2026, 0.5 percentage points below the 10-year Treasury rate of 4.5%.
Example
Stocks or bonds, by the yield
- A stock at $100 earns $5 a share: a P/E of 20, an earnings yield of 5%.
- A 10-year government bond pays 4% a year, fixed.
- The stock earns one point more, but its earnings are not guaranteed, and only part of them is paid to you as dividends.
- If the company’s earnings grow 5% a year, in 10 years it earns $8.14 a share: 8.1% on the $100 you paid. The bond still pays 4%.
The earnings yield is a starting point for comparing stocks with bonds; growth and risk decide the rest.
One level deeper
Setting the market’s earnings yield against the 10-year Treasury yield is sometimes called the “Fed model”, after a 1997 Federal Reserve report noted that the two had moved together. Many economists dispute it: profits tend to rise with inflation, while a bond’s interest does not.
Since 1871, the S&P 500’s earnings yield was above the 10-year rate in 79% of the months. It was last above it in Dec 2023.
Investors also use the inverse of the CAPE (ten years of earnings) as a smoother earnings yield. For single companies, operating profit (EBIT) ÷ enterprise value compares the profit with the price of the whole business, debt included.
Earnings yield against the 10-year bond rate since 1871
The S&P 500’s earnings yield (12-month earnings ÷ price) and the long-term US government bond rate, month by month. The earnings yield jumps when prices crash and drops when profits collapse; bond rates move more slowly. In Jun 2026 the earnings yield was 4.0%, below the bond rate of 4.5%.
The numbers behind the chart
| Date | Earnings yield (S&P 500) | 10-year Treasury rate |
|---|---|---|
| Jan 1871 | 9.0% | 5.3% |
| Dec 1880 | 8.4% | 3.7% |
| Dec 1890 | 6.3% | 3.6% |
| Dec 1900 | 7.0% | 3.1% |
| Dec 1910 | 8.1% | 4.0% |
| Dec 1920 | 11.8% | 5.1% |
| Dec 1930 | 6.2% | 3.3% |
| Dec 1940 | 10.0% | 2.0% |
| Dec 1950 | 14.4% | 2.5% |
| Dec 1960 | 5.8% | 3.8% |
| Dec 1970 | 5.7% | 6.4% |
| Dec 1980 | 11.1% | 12.8% |
| Dec 1990 | 6.5% | 8.1% |
| Dec 2000 | 3.8% | 5.2% |
| Dec 2010 | 6.2% | 3.3% |
| Dec 2020 | 2.5% | 0.9% |
| Dec 2022 | 4.4% | 3.6% |
| Dec 2023 | 4.1% | 4.0% |
| Dec 2024 | 3.5% | 4.4% |
| Dec 2025 | 3.5% | 4.1% |
| Jun 2026 | 4.0% | 4.5% |
Why it matters
It turns a share price into a rate of return you can line up against savings accounts and bonds.
When bond yields rise, stocks with low earnings yields (high P/Es) look less attractive, one reason rising rates often weigh on share prices.
Value investors use it to rank stocks: a higher earnings yield means more profit for each dollar paid.
A common mistake
Myth: An earnings yield of 5% means I earn 5% a year.
In fact: Not in cash. Only the dividend reaches you; the company keeps the rest, and earnings change every year. Your actual return is the dividends plus the change in the share price.
Questions people ask
How do you calculate the earnings yield?
Earnings per share over the last 12 months ÷ the share price × 100. Or simply 100 ÷ the P/E ratio: a P/E of 20 is a 5% earnings yield.
Is a higher earnings yield better?
It means you pay less for each dollar of profit. That can mean a cheaper stock, or one whose profits investors expect to fall. Compare it within one industry and with interest rates.
What is the S&P 500’s earnings yield now?
4.0% in Jun 2026, a P/E of 25.2, against a 10-year Treasury rate of 4.5% that month.
Read more on BigCapital
About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- S&P Composite (price, dividends, earnings, CAPE), US consumer prices and the 10-year Treasury rate: Robert J. Shiller, Online Data (shillerdata.com).
- This page explains a term. It is not investment advice.