By VestAI Research | Last updated: March 2026
Earnings Yield: Meaning, Definition & Indian Stock Market Examples
EPS ÷ share price — the inverse of PE ratio, comparable to bond yields.
What is Earnings Yield?
Earnings Yield = EPS ÷ Stock Price × 100. It is the mathematical inverse of the PE ratio, expressed as a percentage. Earnings yield allows direct comparison between stocks and fixed-income instruments like bonds or FDs, making it useful for asset allocation decisions.
Earnings Yield — Indian Stock Market Example
A stock with PE of 20 has an earnings yield of 5% (1/20). If 10-year government bonds yield 7.2%, the stock is less attractive on earnings yield alone unless growth justifies it. During bull markets, Nifty 50 earnings yield compresses toward 3–4%, signalling expensive valuations relative to bonds.
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Analyse with OrionFrequently Asked Questions about Earnings Yield
How do I use earnings yield to compare stocks to FDs?
If a stock's earnings yield (1/PE) is 5% and your FD rate is 7%, the stock must offer meaningful earnings growth to justify the additional risk. If earnings are growing at 15%+ annually, the stock may still be preferable despite lower initial yield.
What is the Fed Model equivalent for Indian markets?
The Indian version compares Nifty 50 earnings yield to 10-year government bond yields (G-Sec). When earnings yield exceeds bond yield, equities are considered cheap relative to bonds. When bond yields exceed earnings yield, bonds are relatively more attractive.
Related Terms
PE Ratio
Price divided by earnings per share — shows how much investors pay per ₹1 of profit.
Earnings Per Share
Net profit divided by total shares — profit attributable to each share.
Dividend Yield
Annual dividend per share ÷ stock price — income return from holding a stock.
PEG Ratio
PE divided by EPS growth rate — adjusts PE for expected growth.
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