A Brief Note on Earnings Yields (2)

My last post on this focused on trailing earnings.  Trailing earnings have the advantage of being objective, but analysts try to estimate the future.  To some degree they succeed, and that becomes the bar by which we measure the progress of companies.

Now fewer companies have analysts following them, and the database that I use is not as reliable on earnings estimates for foreign companies trading on US exchanges.  The following table covers a huge percentage (98%+) of the market cap of domestic stocks trading in the US.

Definitions:

  • FE Yield: forward earnings yield for the next full 12 fiscal months.
  • E Yield: trailing earnings yield for the last twelve months.
  • D Yield: dividend yield given the current price.
  • F Payout %: what percentage of the next fiscal year’s earnings is comprised by dividends.
  • E Growth: how much do the estimated earnings of the next fiscal year increase over the earnings of the last 12 months.

 

IndustryFE YieldE YieldD YieldF Payout %E growth
0906 – Broadcasting & Cable TV

28.27%

5.85%

1.47%

5%

384%

0436 – Tires

21.00%

15.81%

0.72%

3%

33%

1106 – Airline

19.29%

1.80%

0.08%

0%

971%

0709 – Insurance (Life)

14.46%

13.36%

1.77%

12%

8%

0412 – Auto & Truck Manufacturers

14.11%

26.47%

0.57%

4%

-47%

0966 – Retail (Technology)

14.05%

-8.68%

2.33%

17%

-262%

0724 – Money Center Banks

12.42%

9.33%

1.41%

11%

33%

1027 – Office Equipment

12.30%

10.85%

2.55%

21%

13%

0124 – Metal Mining

12.02%

11.23%

4.18%

35%

7%

0606 – Oil & Gas – Integrated

11.22%

11.04%

2.39%

21%

2%

1015 – Computer Peripherals

11.10%

9.27%

0.21%

2%

20%

0706 – Insurance (Accident & Health)

11.06%

9.11%

1.22%

11%

21%

0509 – Crops

11.05%

9.06%

1.23%

11%

22%

0930 – Printing Services

11.04%

2.80%

4.37%

40%

295%

0121 – Iron & Steel

10.73%

3.33%

2.48%

23%

222%

0809 – Major Drugs

10.49%

5.80%

3.60%

34%

81%

0118 – Gold & Silver

10.46%

1.78%

1.53%

15%

487%

0518 – Office Supplies

10.40%

8.42%

2.51%

24%

24%

0133 – Paper & Paper Products

9.99%

8.15%

2.19%

22%

23%

0206 – Construction & Agricultural Machinery

9.70%

7.02%

1.56%

16%

38%

0730 – S&Ls/Savings Banks

9.57%

2.35%

1.18%

12%

308%

0106 – Chemicals – Plastics and Rubbers

9.51%

7.13%

2.04%

21%

33%

0727 – Regional Banks

9.46%

7.27%

1.57%

17%

30%

0415 – Auto & Truck Parts

9.45%

7.75%

1.38%

15%

22%

0603 – Coal

9.33%

8.55%

2.95%

32%

9%

0609 – Oil & Gas Operations

9.29%

6.98%

1.48%

16%

33%

1024 – Electronic Instruments & Controls

9.26%

7.48%

0.98%

11%

24%

0130 – Non-Metallic Mining

9.11%

8.66%

0.54%

6%

5%

1006 – Computer Hardware

8.92%

6.34%

0.14%

2%

41%

0203 – Aerospace and Defense

8.80%

8.37%

2.23%

25%

5%

0927 – Printing & Publishing

8.59%

3.34%

2.12%

25%

158%

1112 – Railroads

8.59%

6.78%

1.72%

20%

27%

1021 – Computer Storage Devices

8.57%

4.69%

0.00%

0%

83%

0109 – Containters & Packaging

8.50%

4.22%

1.57%

18%

102%

0612 – Oil Well Services & Equipment

8.40%

6.16%

1.62%

19%

36%

1033 – Semiconductors

8.28%

6.05%

1.70%

21%

37%

0409 – Audio & Video Equipment

8.22%

4.33%

0.30%

4%

90%

0969 – Schools

8.17%

10.21%

0.76%

9%

-20%

0951 – Retail (Department & Discount)

8.16%

5.72%

1.96%

24%

43%

0127 – Misc. Fabricated Products

8.08%

7.02%

1.00%

12%

15%

0703 – Consumer Financial Services

8.08%

6.05%

1.89%

23%

33%

0954 – Retail (Drugs)

8.08%

6.99%

1.52%

19%

16%

0218 – Misc. Capital Goods

7.99%

5.92%

1.12%

14%

35%

0715 – Insurance (Property & Casualty)

7.97%

8.27%

0.83%

10%

-4%

0921 – Motion Pictures

7.92%

7.80%

0.98%

12%

2%

0924 – Personal Services

7.81%

6.61%

1.98%

25%

18%

0718 – Investment Services

7.67%

4.89%

1.86%

24%

57%

0103 – Chemical Manufacturing

7.54%

5.92%

1.77%

23%

27%

0209 – Construction – Supplies and Fixtures

7.53%

4.47%

2.09%

28%

69%

0406 – Appliances & Tools

7.50%

5.34%

1.72%

23%

40%

0806 – Healthcare Facilities

7.49%

5.18%

0.10%

1%

45%

0503 – Beverages (Alcoholic)

7.45%

5.40%

1.52%

20%

38%

0512 – Fish/Livestock

7.45%

6.55%

2.17%

29%

14%

1018 – Computer Services

7.44%

4.48%

0.71%

10%

66%

1003 – Communications Equipment

7.39%

4.95%

1.06%

14%

49%

1103 – Air Courier

7.36%

5.54%

2.04%

28%

33%

0957 – Retail (Grocery)

7.35%

4.43%

1.85%

25%

66%

0221 – Mobile Homes & RVs

7.25%

5.78%

1.19%

16%

25%

0903 – Advertising

7.16%

6.26%

1.63%

23%

14%

1036 – Software & Programming

7.14%

5.24%

0.93%

13%

36%

0524 – Tobacco

7.08%

5.61%

3.90%

55%

26%

1030 – Scientific & Technical Instruments

7.04%

5.33%

1.35%

19%

32%

0433 – Textiles – Non-Apparel

7.00%

3.95%

0.09%

1%

77%

0812 – Medical Equipment & Supplies

6.98%

5.53%

1.02%

15%

26%

0430 – Recreational Products

6.97%

4.56%

1.49%

21%

53%

0803 – Biotechnology & Drugs

6.92%

4.31%

2.11%

30%

61%

1203 – Electric Utilities

6.85%

6.32%

3.89%

57%

8%

0515 – Food Processing

6.79%

4.26%

2.40%

35%

59%

0945 – Retail (Apparel)

6.76%

5.01%

1.23%

18%

35%

0421 – Furniture & Fixtures

6.72%

4.99%

1.73%

26%

35%

0963 – Retail (Specialty Non-Apparel)

6.61%

5.44%

0.75%

11%

21%

1115 – Trucking

6.56%

2.90%

0.61%

9%

126%

0960 – Retail (Home Improvement)

6.55%

4.81%

1.86%

28%

36%

0403 – Apparel/Accessories

6.55%

4.20%

0.77%

12%

56%

0939 – Rental & Leasing

6.55%

3.07%

0.53%

8%

113%

0112 – Fabricated Plastic & Rubber

6.53%

2.58%

0.74%

11%

153%

0712 – Insurance (Miscellaneous)

6.44%

5.00%

1.99%

31%

29%

0303 – Conglomerates

6.39%

1.87%

0.31%

5%

241%

0521 – Personal & Household Products

6.37%

5.03%

2.65%

42%

27%

0506 – Beverages (Non-Alcoholic)

6.32%

5.55%

2.61%

41%

14%

0909 – Business Services

6.29%

5.06%

1.13%

18%

24%

0936 – Recreational Activities

6.29%

4.56%

2.04%

32%

38%

0975 – Waste Management Services

6.22%

4.43%

2.15%

35%

40%

0972 – Security Systems & Services

6.19%

-1.48%

1.33%

21%

-519%

0942 – Restaurants

5.99%

4.98%

1.93%

32%

20%

0915 – Communications Services

5.98%

1.28%

4.73%

79%

368%

1209 – Water Utilities

5.86%

5.93%

3.19%

54%

-1%

0418 – Footwear

5.64%

4.51%

1.07%

19%

25%

1109 – Misc. Transportation

5.62%

4.04%

1.23%

22%

39%

0918 – Hotels & Motels

5.44%

3.77%

0.86%

16%

44%

0215 – Construction Services

5.08%

2.21%

1.10%

22%

130%

0424 – Jewelry & Silverware

5.01%

3.56%

0.04%

1%

41%

0427 – Photography

4.99%

1.72%

0.00%

0%

189%

1206 – Natural Gas Utilities

4.91%

3.56%

4.01%

82%

38%

1012 – Computer Networks

4.76%

0.87%

0.28%

6%

445%

1118 – Water Transportation

4.62%

-0.91%

0.75%

16%

-607%

0912 – Casinos & Gaming

4.57%

6.23%

1.14%

25%

-27%

0948 – Retail (Catalog & Mail Order)

3.91%

2.86%

0.01%

0%

37%

0933 – Real Estate Operations

3.03%

2.79%

4.01%

132%

9%

0115 – Forestry & Wood Products

2.14%

2.13%

2.60%

121%

1%

0212 – Construction – Raw Materials

2.11%

-1.93%

1.38%

65%

-209%

And here it is by sectors:

SectorFE YieldE YieldD YieldF Payout %E growth
06 – Energy

9.94%

8.60%

1.93%

22%

16%

07 – Financial

9.44%

7.21%

1.48%

21%

31%

04 – Consumer Cyclical

9.15%

10.61%

1.06%

10%

-14%

09 – Services

8.85%

4.32%

2.18%

50%

105%

01 – Basic Materials

8.67%

6.43%

2.02%

31%

35%

11 – Transportation

8.60%

4.99%

1.49%

30%

72%

Grand Average

8.39%

5.97%

1.81%

30%

41%

02 – Capital Goods

7.98%

6.14%

1.72%

28%

30%

10 – Technology

7.89%

5.53%

0.84%

15%

43%

08 – Health Care

7.38%

4.79%

1.88%

39%

54%

05 – Consumer Non-Cyclical

6.72%

5.15%

2.79%

54%

30%

03 – Conglomerates

6.39%

1.87%

0.31%

16%

241%

12 – Utilities

6.13%

5.30%

3.93%

74%

16%

Some of the percentages for earnings growth are inflated because the last 12 months include writeoffs, disappointments, etc., but forecasted earnings are typically optimistic, and anticipate no errors.

I would encourage you to view this where you look down the list, and say, “Wait. That doesn’t look right. That industry shouldn’t be that high/low relative to other industries.”  Then dig in and try to analyze for individual companies where there might be real advantage in the industries with good relative prospects.

Being forward-looking is an advantage if you have an ability to discern where industry trends are going to change; I may have that to some small degree, which is why when I invest, I look at trailing earnings and forward earnings.  Have one foot in reality, and the other foot in hope/analysis.  Things change less than expected, but things change.

As for me, I’m happy with my energy, insurance, and technology stocks, even if I haven’t been rewarded well over the last three months.  They are cheap, and have decent pricing power.  I stress patience, and so I hold after poor results, and I might increase the stakes.

2 Comments

  • Conscience of a Conservative says:

    My problem with forward earnings as estimated by analysts is my own perception of how much these numbers are guided by the companies themselves and how little the minimal vetting the get by the analysts putting them out. If more analysts acted like forensic accountants the process would be much better, unfortunately they are more like stock promoters and salesmen who realize that positive numbers generate more stock commissions and may be rewarded by investment banking rewards for their firm later on. I’ll stick with the historic GAAP numbers thank you.

  • Conscience of a Conservative says:

    David, I spoke to a young analyst who covered G.E. for a buy-side firm she was employed by. I asked her how much she dug into the numbers. She said G.E. is too big. It’s impossible.