What is the 'SEC Yield'

The SEC yield is a standard yield calculation developed by the U.S. Securities and Exchange Commission (SEC) that allows for fairer comparisons of bond funds. It is based on the most recent 30-day period covered by the fund's filings with the SEC. The yield figure reflects the dividends and interest earned during the period after the deduction of the fund's expenses. It is also referred to as the "standardized yield."

BREAKING DOWN 'SEC Yield'

The SEC yield is used to compare bond funds because it captures the effective rate of interest an investor may receive in the future. It is widely considered a good way to compare mutual funds or exchange-traded funds (ETFs) because this yield measure is generally very consistent from month to month. The resulting yield calculation shows investors what they would earn in yield over the course of a 12-month period if the fund continued earning the same rate for the rest of the year. It is mandatory for funds to calculate this yield.

Calculation of the SEC Yield

Most funds calculate a 30-day SEC yield on the last day of each month, though U.S. money market funds calculate and report a seven-day SEC yield. The standardized formula for the 30-day SEC yield consists of four variables:

a = interest and dividends received over the last 30-day period

b = accrued expenses over the last 30-day period, excluding reimbursements

c = the average number of shares outstanding, on a daily basis, which were entitled to receive distributions

d = the maximum price per share on the day of the calculation, the last day of the period

The formula of the annualized 30-day SEC yield is:

2 x (((a - b) / (c x d) + 1) ^ 6 - 1)

As an example, assume Investment Fund X earned $12,500 in dividends and $3,000 in interest. The fund also recorded $6,000 worth of expense, of which $2,000 was reimbursed. The fund has 150,000 shares entitled to receive distributions, and on the last day of the period, the day the yield is being calculated, the highest price the shares reached was $75. In this scenario, the variables equal:

a = $12,500 + $,3000 = $15,500

b = $6,000 - $2,000 = $4,000

c = 150,000

d = $75

Once these numbers are plugged into the formula, it looks like this:

30-day yield = 2 x ((($15,500 - $4,000) / (150,000 x $75) + 1) ^ 6 - 1), or 2 x (0.00615) = 1.23%

RELATED TERMS
  1. Yield

    Yield is the return a company gives back to investors for investing ...
  2. Gross Yield

    The gross yield is the yield on an investment before the deduction ...
  3. Running Yield

    Running yield is the annual income on an investment divided by ...
  4. Yield On Cost (YOC)

    Yield on Cost (YOC) is the annual dividend rate of a security ...
  5. Seven Day Yield

    Seven day yield is a measure of the annualized yield for a money ...
  6. Breakeven Yield

    The breakeven yield is the yield required to cover the cost of ...
Related Articles
  1. Investing

    4 Best Dividend-Paying Global Equity ETFs (YYY, KBWD)

    Review these global equity ETFs to learn more about opportunities for robust dividends. These funds provide some of the highest yields.
  2. Investing

    SPDR: Top 5 High Dividend-Yield Sector ETFs (XLRE, XLU)

    Learn about the risk factors present in several high dividend-yielding sector ETFs, and discover which sector investors may want to consider avoiding.
  3. Investing

    FSDIX, VDIGX, FEQTX, VEIPX: Top Dividend Paying Equity Funds

    Discover five of the best dividend-paying mutual funds that primarily invest in U.S. equities, and learn about the characteristics of these funds.
  4. Investing

    FRIFX, FEQIX: Fidelity’s High Yielding Equity Mutual Funds

    Discover four mutual funds administered and managed by Fidelity Investments that have high 30-day SEC yields and high distribution yields.
  5. Investing

    Short-Term Bond ETFs Draw Investors as Yields Surge (SJNK, SHY)

    Investors have been flocking to short-term bond ETFs recently, as yields have been rising sharply.
  6. Investing

    Long-Term Treasury Bond ETFs Are Attracting Assets in 2016 (TLT, TLH)

    Discover five exchange-traded funds that invest in U.S. Treasury long-term bonds and experienced large year-to-date capital inflows as of March 4, 2016.
  7. Investing

    A History of the S&P 500 Dividend Yield

    Find out why the dividend yield for the S&P 500 Index remains historically low, and what dividend yields used to look like before the Internet Age.
  8. Financial Advisor

    The Top 5 Intermediate Bond Funds for 2016

    Discover the top five intermediate-term bond mutual funds that invest in fixed-income securities with an average maturity between one and seven years.
  9. Investing

    3 Best High-Yielding Long Term Government Bond ETFs (EDV, ZROZ)

    Learn about three exchange-traded funds that invest in long-term U.S. government bonds and offer high distribution yields to investors.
  10. Tech

    SEC Targets Cryptocurrency Hedge Funds In Probe

    For the first time, hedge funds have been drawn into SEC examinations regarding cryptocurrencies.
RELATED FAQS
  1. Do Vanguard ETFs pay dividends?

    Learn about Vanguard exchange-traded funds (ETFs) and how most of them typically have low expense ratios and pay dividends ... Read Answer >>
  2. Yield vs Interest Rate

    Yield is the dividend or interest investors receive from a security, while interest rates are figures charged by a lender, ... Read Answer >>
  3. What does a negative bond yield mean?

    Find out what it means when a bond has a negative yield and what circumstances must arise for the yield to be negative when ... Read Answer >>
  4. How do I use the holding period return yield to evaluate my bond portfolio?

    Find out how to use the holding period return yield formula to evaluate the performance of bonds in your portfolio, and view ... Read Answer >>
  5. What is the difference between yield and dividend?

    Learn how to differentiate between dividend yield and dividend return, and see why dividend yield is the more popular rate ... Read Answer >>
Hot Definitions
  1. Risk Tolerance

    Risk tolerance is the degree of variability in investment returns that an individual is willing to withstand.
  2. Initial Coin Offering (ICO)

    An Initial Coin Offering (ICO) is an unregulated means by which funds are raised for a new cryptocurrency venture.
  3. Federal Funds Rate

    The federal funds rate is the interest rate at which a depository institution lends funds maintained at the Federal Reserve ...
  4. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  5. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  6. Restricted Stock Unit - RSU

    A restricted stock unit is a compensation issued by an employer to an employee in the form of company stock.
Trading Center