Yield

AAA

DEFINITION of 'Yield'

The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.
{C}

INVESTOPEDIA EXPLAINS 'Yield'

This seemingly simple term, without a qualifier, can be rather confusing to investors.

For example, there are two stock dividend yields. If you buy a stock for $30 (cost basis) and its current price and annual dividend is $33 and $1, respectively, the "cost yield" will be 3.3% ($1/$30) and the "current yield" will be 3% ($1/$33).

Bonds have four yields: coupon (the bond interest rate fixed at issuance), current (the bond interest rate as a percentage of the current price of the bond), and yield to maturity (an estimate of what an investor will receive if the bond is held to its maturity date). Non-taxable municipal bonds will have a tax-equivalent (TE) yield determined by the investor's tax bracket.

Mutual fund yields are an annual percentage measure of income (dividends and interest) earned by the fund's portfolio, net of the fund's expenses. In addition, the "SEC yield" is an indicator of the percentage yield on a fund based on a 30-day period.

VIDEO

RELATED TERMS
  1. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity ...
  2. Distribution Yield

    The amount of cash flow received or paid out by an annuity, REIT ...
  3. Yield To Call

    The yield of a bond or note if you were to buy and hold the security ...
  4. Annual Percentage Yield - APY

    The effective annual rate of return taking into account the effect ...
  5. Current Yield

    Annual income (interest or dividends) divided by the current ...
  6. Dividend Yield

    A financial ratio that shows how much a company pays out in dividends ...
Related Articles
  1. Thinkstock|purestock
    Bonds & Fixed Income

    Understanding Bond Prices and Yields

    Understanding this relationship can help an investor in any market.
  2. Bonds & Fixed Income

    Are High-Yield Bonds Too Risky?

    Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio.
  3. Insurance

    Consider Prime Rate Funds For More Income

    These funds may give you the reliable stream of income you need when you're retired.
  4. Economics

    What is the difference between yields and interest rates?

    The main difference between yields and interest rates is that each term refers to different financial instruments. Yield commonly refers to the dividend, interest or return the investor receives ...
  5. Investing

    If the price of the bond falls, does that mean the company won't pay me the par value?

    When you buy a bond, you are loaning money to the issuer. Because a bond is a loan, the interest paid to the bondholder is payment for lending the money. The interest payable is stated as a percentage ...
  6. Investing

    Why do commercial bills have higher yields than T-bills?

    The reason that commercial bills have higher yields than T-bills is due to the varying credit quality of each bill type. The credit rating of the entity issuing the bill gives investors an idea ...
  7. Investing

    Are high-yield bonds better investments than low-yield bonds?

    Most bonds typically make periodic payments, known as coupon payments, to the bondholder. A bond's indenture, which will be known when the purchaser buys the bond, will specify the coupon payments ...
  8. Investing

    Can a bond have a negative yield?

    The return a bond provides to an investor is measured by its yield, which is quoted as a percentage. Current yield is a commonly quoted yield calculation, used to evaluate the return on a bond ...
  9. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  10. What's a Marketable Security?
    Active Trading

    What's a Marketable Security?

    Marketable securities are financial instruments that can be readily bought and sold in a public market. The key feature is the ease with which it can be sold and converted into cash. Usually, ...

You May Also Like

Hot Definitions
  1. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  2. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  3. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  4. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  5. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
  6. Special Administrative Region - SAR

    Unique geographical areas with a high degree of autonomy set up by the People's Republic of China. The Special Administrative ...
Trading Center