**Definition**

Earnings yield is the percentage an investor could expect a company to make per share on an annual basis. The earnings yields is calculated by taking the earning per share (EPS) and dividing it by the current market price.

**Calculation**

Earnings Yield = EPS/Current Price

Let's say Company A has an earnings per share of $5 and a current price of $25.

$5/$25 = 20% earnings yield

With this example, an investment in Company A could yield 20% per share for the year.

**Why is earnings yield important?**

The earnings yield can assist investors in comparing potential returns between two equities. Growth stocks will generally have a lower earnings yield, and value stocks tend to have much higher earnings yields.