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.
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.
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.