Capital Gains Yield

Definition of 'Capital Gains Yield'


The price appreciation component of a security's (such as a common stock) total return. For stock holdings, the capital gains yield will be the change in price divided by the original (purchase) price.

Calculated as:

Capital Gains Yield


Where:
P0 = Original price of the security
P1 = Current/Selling price of the security

Investopedia explains 'Capital Gains Yield'




For example, suppose Peter purchased a share of XYZ for $100 and he later sells the share for $110. The capital gains yield for that investment would be 10%.

It is important to analyze both the capital gains yield and the total return yield of an investment holding. Dividends are not to be counted in a capital gains yield assessment, but keep in mind that depending on the stock, dividends could comprise a substantial portion of the total return of the stock compared to capital gains.


Filed Under:

comments powered by Disqus
Hot Definitions
  1. Yield Burning

    The illegal practice of underwriters marking up the prices on bonds for the purpose of reducing the yield on the bond. This practice, referred to as "burning the yield," is done after the bond is placed in escrow for an investor who is awaiting repayment.
  2. Marginal Analysis

    An examination of the additional benefits of an activity compared to the additional costs of that activity. Companies use marginal analysis as a decision-making tool to help them maximize their profits. Individuals unconsciously use marginal analysis to make a host of everyday decisions. Marginal analysis is also widely used in microeconomics when analyzing how a complex system is affected by marginal manipulation of its comprising variables.
  3. Treasury Inflation Protected Securities - TIPS

    A treasury security that is indexed to inflation in order to protect investors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government and since their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed.
  4. Gilt-Edged Switching

    The selling and repurchasing of certain high-grade stocks or bonds to capture profits. Gilt-edged switching involves gilt-edged security, which can be high-grade stock or bond issued by a financially stable company such as the Blue Chip companies or by certain governments.
  5. Master Limited Partnership - MLP

    A type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP's cash flow, whereas the general partner is the party responsible for managing the MLP's affairs and receives compensation that is linked to the performance of the venture.
  6. Class Action

    An action where an individual represents a group in a court claim. The judgment from the suit is for all the members of the group (class).
Trading Center