Stock and Bond Valuation: Dividend Yield, P/E, P/B, and Bond Pricing
How dividend yield, price-to-earnings ratio, price-to-book ratio, and zero-coupon bond pricing each answer a different valuation question.
Stocks and bonds are valued using very different logic — these four metrics cover the core of both.
Dividend yield: income relative to price
Dividend yield is annual dividend per share divided by share price. A $2.40 annual dividend on a $60 share price gives a 4% yield — a common range for established dividend-paying stocks, though unusually high yields can sometimes signal a falling share price rather than unusually generous payouts.
P/E ratio: price relative to earnings
Price-to-earnings compares share price to earnings per share. A $100 share price against $5 EPS gives a P/E of 20 — what a company is trading at "good" P/E varies enormously by industry and growth expectations, with high-growth companies often trading at much higher multiples than mature, slow-growth ones.
P/B ratio: price relative to book value
Price-to-book compares share price to book value per share (assets minus liabilities, per share). A $45 share price against a $20 book value per share gives a P/B of 2.25 — a P/B below 1 can indicate undervaluation or troubled assets, depending on context.
Bond pricing: the time value of a fixed future payment
A zero-coupon bond paying $1,000 at maturity in 10 years, at a 5% yield, is worth approximately $613.91 today — the present value of that single future payment, discounted back at the bond's yield.
Two very different valuation frameworks
Stocks are valued relative to earnings, book value, and dividend income; bonds are valued as the present value of a fixed future payment. Try the dividend yield calculator, P/E ratio calculator, P/B ratio calculator, and bond price calculator to see both frameworks in action.