The S&P 500's earnings yield sits at roughly 3.35% in September 2026, while the 10-year Treasury yield trades near 4.8%. Most investors are used to thinking in P/E ratios, but flip that same number into a percentage — earnings yield — and it becomes something you can hold up directly against a bond yield, a savings rate, or any other return you're weighing against stocks.
The formula: P/E in reverse
Earnings yield is earnings per share divided by share price, multiplied by 100 to get a percentage. Since the P/E ratio is price divided by earnings, earnings yield is just its reciprocal: 1 ÷ P/E × 100. A stock trading at a 25x P/E has a 4% earnings yield. A stock at 12.5x has an 8% earnings yield. Nothing new is being measured — it's the exact same relationship between price and profit, just expressed the other way around.
That reversal matters because a ratio like "25x" doesn't mean much next to other kinds of returns. A percentage does. The S&P 500's current P/E of roughly 26 translates to an earnings yield of about 3.8%, using trailing twelve-month earnings — a number you can now line up against a savings account rate, a corporate bond coupon, or the 10-year Treasury.
Why the Treasury comparison matters right now
With the 10-year Treasury yield hovering near 4.8% and the S&P 500's earnings yield closer to 3.35-3.8% depending on the earnings window used, stocks are currently priced to deliver less current earnings per dollar invested than a risk-free government bond. That gap is sometimes called the equity risk premium going negative, and it's one of the more closely watched signals in market valuation debates — not because it predicts a crash, but because it tells you how much extra return the market is (or isn't) demanding for taking on equity risk over a guaranteed Treasury coupon.
This doesn't mean bonds are automatically the better buy. Earnings yield reflects today's profits, not the growth investors expect tomorrow, and stock earnings typically grow over time while a bond's coupon is fixed. But when the spread compresses this much, it's a reasonable prompt to ask whether the stocks you own are still cheap enough to justify the extra risk — which is exactly the kind of question a screener is built to answer stock by stock, rather than at the index level alone.
Using earnings yield to screen for value
Earnings yield is most useful as a quick relative-value filter, especially across a large universe of stocks where you want to compare valuation without staring at a wall of P/E multiples. Setting a floor above 6-7% (a P/E below roughly 14-17x) surfaces stocks priced more cheaply than the broad market's current level. Comparing that floor against the risk-free rate — currently near 4.8% on the 10-year Treasury — flags names priced to earn less than a government bond, which is worth a second look rather than an automatic pass. Pairing an earnings-yield filter with ROE, debt-to-equity, or margin trends helps separate genuinely cheap stocks from ones the market is pricing in trouble for, and it also handles unprofitable companies more gracefully than P/E, which turns meaningless once earnings go negative.