Current Yield
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Definition of 'Current Yield'Annual income (interest or dividends) divided by the current price of the security. This measure looks at the current price of a bond instead of its face value and represents the return an investor would expect if he or she purchased the bond and held it for a year. This measure is not an accurate reflection of the actual return that an investor will receive in all cases because bond and stock prices are constantly changing due to market factors. Also referred to as "bond yield", or "dividend yield" for stocks. |
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Investopedia explains 'Current Yield'For example, if a bond is priced at $95.75 and has an annual coupon of $5.10, the current yield of the bond is 5.33%. If the bond is a 10-year bond with nine years remaining and you were only planning to hold it for one year, you would receive the $5.10, but your actual return would depend on the bond's price when you sold it. If, during this period, interest rates rose and the price of your bond fell to $87.34, your actual return for the period would be -3.5% (-$3.31/$95.75) because although you gained $5.10 in dividends, your capital loss was $8.41. |
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