--- title: Price Earnings to Growth and Dividend Yield (PEGY) | Formula, Example description: Price earning to growth and dividend yield is a metric used in stock analysis that measures a stock’s potential for future earnings growth --- [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo-white.4f6047d4.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo.53b28bee.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) **[Home](https://www.carboncollectiveinvesting.com/) > [Sustainable Investing](https://www.carboncollectiveinvesting.com/sustainable-investing) >** Price Earnings to Growth and Dividend Yield (PEGY) # Price Earnings to Growth and Dividend Yield (PEGY) ![](https://www.carboncollectiveinvesting.com/hubfs/Brooke%20Tomasetti.png) Written by Brooke Tomasetti | Reviewed by [Subject Matter Experts](https://www.carboncollectiveinvesting.com/subject-matter-experts) Updated on October 1, 2024 Fact Checked Why Trust Carbon Collective? ### Table of Contents Price earning to growth and dividend yield (PEGY) is a metric used in stock analysis that measures a stock’s potential for future earnings growth and dividend payments. The price earning to growth and dividend yield is sometimes also called the dividend-adjusted PEG ratio. It was created as a way to improve the [price to earnings ratio](https://www.carboncollectiveinvesting.com/sustainable-investing/price-to-earnings-ratio/) metric by Peter Lynch.  By including a stock’s future growth prospects and dividend yield into a stock analysis, the PEGY ratio allows investors to identify an undervalued stock. The PEGY ratio allows all companies to be analyzed on an even playing field. A young new company most likely will not pay dividends but could experience a high and fast growth rate. A mature company, on the other hand, won’t experience as fast of a growth rate as the young company but could pay dividends. If you were to only use the price to earnings ratio then the mature company would be at a disadvantage.   When using the price earning to growth and dividend yield ratio to analyze a stock you want the resulting calculation to be below 1.0. A score of 1.0 or below means that the stock is currently selling at a great cost and that the stock has high growth potential or high dividend yields. ## **PEGY Formula** ![](https://www.carboncollectiveinvesting.com/hubfs/image-png-Apr-23-2022-06-31-25-00-AM.png) The [price to earnings](https://www.carboncollectiveinvesting.com/sustainable-investing/price-to-earnings-ratio/) (P/E) ratio is calculated using the following formula: ![](https://www.carboncollectiveinvesting.com/hubfs/image-png-Apr-23-2022-06-32-02-44-AM.png) The projected earnings growth rate is the percentage the company expects to grow its earnings over the coming year.  The [dividend yield](https://www.carboncollectiveinvesting.com/sustainable-investing/dividend-yield/) is calculated by dividing the dividend per share by the stock’s current price per share. It is important to remember that even though both the projected earnings growth rate and the dividend yield are both percentages they’re represented as whole numbers and not decimals in the PEGY formula (10% is 10, not 0.10).  ## **PEGY Example** For this example let’s assume that you want to compare 3 stocks to determine which if any would be a good investment at their current price. Below is the breakdown of the three companies. Company 1 is a company that has been around for 7 years and is now starting to be considered a mature company.  Company 2 is new; they just became public a year ago and while they’re expecting high growth, they don’t pay any dividends. Company 3 is a fully mature company with slow but continual growth that pays dividends. ![](https://www.carboncollectiveinvesting.com/hubfs/image-png-Apr-26-2022-07-19-05-73-AM.png) We can apply the values to our variables and calculate the price earning to growth and dividend yield for each company.  ![](https://www.carboncollectiveinvesting.com/hubfs/image-png-Apr-23-2022-06-32-43-13-AM.png) ![](https://www.carboncollectiveinvesting.com/hubfs/image-png-Apr-23-2022-06-33-10-52-AM.png) ![](https://www.carboncollectiveinvesting.com/hubfs/image-png-Apr-23-2022-06-33-35-68-AM.png) As you can see from the example, companies 1 and 3 have PEGY ratios below 1. That means that it might be a good idea to invest in them. Even though it is young and expecting a 40% growth in earnings over the next year, business 2 has a PEGY ratio of 1.5. This means that it would not be the best investment at this time.  ## **PEGY Analysis ** Using the PEGY ratio to analyze stocks is a great way to ensure that each stock is being evaluated on equal terms. However, a disadvantage of the PEGY ratio is that it uses predicted growth so there is no way of guaranteeing that the ratio accurately reflects the stock’s future performance.    ## **PEGY Conclusion** - The price earning to growth and dividend yield accounts for a stock’s potential for future earnings growth and dividend payments. - It’s also referred to as the dividend-adjusted peg ratio and is an improvement to the price to earnings ratio. - This formula requires 3 variables: price to earnings ratio (price / earnings per share), projected earnings growth rate, and dividend yield  - It levels the analysis playing field of both young and mature companies. - Since it uses growth predictions and not historic growth data, there is no guaranteed accuracy of a company’s stock performance in the future. - A score below 1.0 is an indication that the stock has high growth potential or high dividend yields and is currently selling at a great price. ## **PEGY Calculator** You can use the price earning to growth and dividend yield calculator below to quickly analyze the stock’s growth and dividend yield potential by entering the required numbers.   Earnings Growth Rate Dividend Yield Price to Earnings Ratio (P/E) PEGY Ratio   ## FAQs ### What is price earnings to growth and dividend yield ratio (PEGY)? The price earnings to growth and dividend yield ratio (PEGY) is a formula used to determine whether a stock has high growth potential or high dividend yields. The ratio is calculated by dividing the price to earnings ratio by the projected earnings growth rate, then multiplying that number by the dividend yield. A score below 1.0 is an indication that the stock has high growth potential or high dividend yields and is currently selling at a great price. ### How is PEGY ratio calculated? The PEGY ratio is calculated by dividing the price to earnings ratio by the projected earnings growth rate, then multiplying that number by the dividend yield. ### What is a good PEGY ratio? A good PEGY ratio is anything below 1.0. This indicates that the stock has high growth potential or high dividend yields and is currently selling at a great price. ### Why should you use the PEGY ratio? The PEGY ratio is a great way to ensure that each stock is being evaluated on equal terms. However, a disadvantage of the PEGY ratio is that it uses predicted growth so there is no way of guaranteeing that the ratio accurately reflects the stock’s future performance. ### Why is price earnings to growth and dividend yield ratio important? The price earnings to growth and dividend yield ratio is important because it evaluates a stock’s potential for future earnings growth and dividend payments. It also referred to as the dividend-adjusted peg ratio and is an improvement to the price to earnings ratio. ### Related Topics - [Sustainable 401(k) Plan](https://www.carboncollective.co/401k) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing/) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Retirement Glossary](https://www.carboncollective.co/sustainable-investing/retirement-planning-glossary) - [Best Retirement Plans](https://www.carboncollective.co/sustainable-investing/the-10-best-retirement-plans) - [Wealth Manager Vs Financial Advisor](https://www.carboncollective.co/sustainable-investing/wealth-manager-vs.-financial-advisor) ![Attend Our Next Webinar](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-webinar.12af7b6e.svg) ### Attend Our Next Webinar Join our next Sustainable Investing 101 webinar, get our favorite DIY options, and walk through how we build our portfolios. [Watch Now](https://www.carboncollective.co/sustainable-investing-webinar-green-retirement-month) ![Get Our Newsletter](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-demo.6ed28722.svg) ### Get Our Newsletter Go a level deeper with us and investigate the potential impacts of climate change on investments like your retirement account. Join Newsletter ![close-typeform](data:image/gif;base64,R0lGODlhEQARAIAAAODn7P///yH5BAEHAAEALAAAAAARABEAAAIqBIKpab3v3EMyVHWtWZluf0za0XFNKDJfCq5i5JpomdUxqKLQVmInqyoAADs=) ![Talk To A Human](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-chat.49d48c5b.svg) ### Talk To A Human Joining a new investment service can be intimidating. We’re here for you. Click below to email us a question or book a quick call. [Ask a Question](https://ask.carboncollective.co/f70pooobq) Topics ## Sustainable Investing Topics View our list of some topics below. See More - Portfolios - [Performance](https://www.carboncollectiveinvesting.com/returns) - About - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - Learn - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - Contact - [Contact us](mailto:hello@carboncollective.co) - [Legal](https://www.carboncollective.co/legal) - [Privacy Policy](https://www.carboncollectiveinvesting.com/hubfs/2022-11%20Carbon%20Collective%20Privacy%20Policy.pdf) - [Back to top](https://www.carboncollectiveinvesting.com/sustainable-investing/pegy-ratio#top-of-page) DISCLAIMERS: Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective"), an SEC-registered investment adviser. A copy of Carbon Collective's current written disclosure statement discussing Carbon Collective’s business operations, services, and fees is available at the SEC’s investment adviser public information website – [www.adviserinfo.sec.gov](https://adviserinfo.sec.gov/firm/summary/310129) or [our legal documents here](https://blog.carboncollective.co/legal-documents/). The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. Carbon Collective does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Carbon Collective’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and Carbon Collective's charges and expenses. Carbon Collective's internet-based advisory services are designed to assist clients in achieving discrete financial goals. They are not intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation and do not incorporate specific investments that clients hold elsewhere. For more details, see our Form CRS, Form ADV Part 2 and other disclosures. Past performance does not guarantee future results, and the likelihood of investment outcomes are hypothetical in nature. Not an offer, solicitation of an offer, or advice to buy or sell securities in jurisdictions where Carbon Collective is not registered. © 2026 Carbon Collective Corporation. All rights reserved. × #### Fact Checked Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. Our team of reviewers are established professionals with years of experience in areas of personal finance and climate. They have contributed to top tier financial publications, such as Reuters, Axios, Ag Funder News, Bloomberg, Marketwatch, Yahoo! Finance, and many others. This team of experts helps Carbon Collective maintain the highest level of accuracy and professionalism possible. × #### Why Trust Carbon Collective Carbon Collective is the first online investment advisor 100% focused on solving climate change. We believe that sustainable investing is not just an important climate solution, but a smart way to invest. We follow ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Much of our research comes from leading organizations in the climate space, such as Project Drawdown and the International Energy Agency (IEA). Our goal is to deliver the most understandable and comprehensive explanations of climate and finance topics. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including MarketWatch, Bloomberg, Axios, TechCrunch, Forbes, NerdWallet, GreenBiz, Reuters, and many others. We strive to empower readers with the most factual and reliable climate finance information possible to help them make informed decisions. } ```json { "@context" : "https://schema.org", "@type" : "Organization", "alternateName" : "Carbon Collective", "contactPoint" : { "@type" : "ContactPoint", "areaServed" : "US", "availableLanguage" : "en", "contactType" : "customer service", "telephone" : "(650) 868-2697" }, "logo" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png", "name" : "Carbon Collective Investing LLC", "sameAs" : [ "https://www.facebook.com/carboncollectiveinvesting/", "https://twitter.com/carbncollective", "https://www.instagram.com/carbon.collective/", "https://www.youtube.com/channel/UC769Y-F-L_B37kyQfdpvyXA", "https://www.linkedin.com/company/carbon-collective/", "https://www.crunchbase.com/organization/carbon-collective", "https://adviserinfo.sec.gov/firm/summary/310129", "https://www.wikidata.org/wiki/Q110243690" ], "url" : "https://www.carboncollective.co/" } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The price earnings to growth and dividend yield ratio (PEGY) is a formula used to determine whether a stock has high growth potential or high dividend yields. The ratio is calculated by dividing the price to earnings ratio by the projected earnings growth rate, then multiplying that number by the dividend yield. A score below 1.0 is an indication that the stock has high growth potential or high dividend yields and is currently selling at a great price." }, "name" : "What is price earnings to growth and dividend yield ratio (PEGY)?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The PEGY ratio is calculated by dividing the price to earnings ratio by the projected earnings growth rate, then multiplying that number by the dividend yield." }, "name" : "How is PEGY ratio calculated?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "A good PEGY ratio is anything below 1.0. This indicates that the stock has high growth potential or high dividend yields and is currently selling at a great price." }, "name" : "What is a good PEGY ratio?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The PEGY ratio is a great way to ensure that each stock is being evaluated on equal terms. However, a disadvantage of the PEGY ratio is that it uses predicted growth so there is no way of guaranteeing that the ratio accurately reflects the stock’s future performance." }, "name" : "Why should you use the PEGY ratio?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The price earnings to growth and dividend yield ratio is important because it evaluates a stock’s potential for future earnings growth and dividend payments. It also referred to as the dividend-adjusted peg ratio and is an improvement to the price to earnings ratio." }, "name" : "Why is price earnings to growth and dividend yield ratio important?" } ] } ``` ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "https://20345524.fs1.hubspotusercontent-na1.net/hubfs/20345524/Brooke%20Tomasetti.png", "url" : "https://www.carboncollectiveinvesting.com/sustainable-investing/author/brooke-tomasetti" }, "dateModified" : "2024-10-01", "datePublished" : "2021-03-24", "description" : "Price earning to growth and dividend yield is a metric used in stock analysis that measures a stock’s potential for future earnings growth", "headline" : "Price Earnings to Growth and Dividend Yield (PEGY) | Formula, Example", "image" : "", "mainEntityOfPage" : { "@id" : "https://www.carboncollectiveinvesting.com/sustainable-investing/pegy-ratio", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png" }, "name" : "Carbon Collective" } } ```