Buy That Earnings Yield

Plenty of stocks are cheap enough to buy. For a lot of good companies the earnings yield, which is the inverse of the price/earnings ratio, is higher than the yield on high-grade corporate bonds. That makes such stocks cheap - cheap for the company, if it wants to buy in shares; cheap for a corporat...

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Veröffentlicht in:Forbes 2005-11, Vol.176 (11), p.256
1. Verfasser: Fisher, Kenneth L
Format: Magazinearticle
Sprache:eng
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Zusammenfassung:Plenty of stocks are cheap enough to buy. For a lot of good companies the earnings yield, which is the inverse of the price/earnings ratio, is higher than the yield on high-grade corporate bonds. That makes such stocks cheap - cheap for the company, if it wants to buy in shares; cheap for a corporate acquirer financing a takeover with its own bonds; and cheap for a portfolio investor whose alternative is owning corporate bonds. Forecasters have wrongly predicted steeply rising long-term interest rates for fully two years. Yet ten-year rates have hovered within a half-percentage point or so of 4.25%. This cheap money has prevailed even as the Fed has jacked up the cost of overnight loans. High short-term rates have renewed foreigners' confidence in the dollar. Foreigners have a lot of money to save, and so long as they don't have to worry about a devaluation of the dollar, they are happy to save it here.
ISSN:0015-6914
2609-1445