| Definition |
The ratio of annual dividends paid per share to the stock's current price. |
The ratio of earnings per share (EPS) to the stock's current price, expressed as a percentage. |
| Formula |
(Annual Dividends per Share / Price per Share) × 100% |
(Earnings per Share / Price per Share) × 100% |
| Purpose |
Measures the income return on an investment from dividends. |
Measures the earnings generated relative to the stock price, indicating profitability. |
| Focus |
Focuses on cash income received by shareholders. |
Focuses on overall company profitability relative to price. |
| Investment Use |
Used by income-focused investors seeking dividend income. |
Used by value investors to assess how cheap or expensive a stock is. |
| Interpretation |
Higher dividend yield means more income for investors but may indicate slower growth. |
Higher earnings yield suggests the stock may be undervalued or more profitable. |
| Volatility |
Relatively stable if company maintains dividends. |
Can fluctuate more with changes in earnings and price. |
| Growth Aspect |
May be lower in high-growth companies that reinvest earnings instead of paying dividends. |
Includes earnings retained for growth, not just dividends. |
| Risk Consideration |
Dividend cuts reduce yield and may signal trouble. |
Earnings can be volatile and affected by accounting changes. |
| Example |
A stock priced at ₹100 paying ₹5 annual dividend has a 5% dividend yield. |
A stock priced at ₹100 with EPS of ₹10 has a 10% earnings yield. |
| Investor Preference |
Preferred by investors looking for steady cash flow and income. |
Preferred by investors evaluating value and profitability. |
| Limitations |
Does not account for capital gains or earnings reinvestment. |
Does not show how much earnings are paid out versus reinvested. |
| Summary |
Dividend yield shows income return from dividends, useful for income investors. |
Earnings yield shows profitability relative to price, useful for value analysis. |
dividend yield vs earnings yield