Definition of 'Yield'
In finance, as in agriculture, the yield is the return on an investment. Instead of seeds, time, and labor, however, yield refers specifically to the dividends or interest received by an investor from a security (such as a stock or a bond). Yields are expressed annually as a percentage, based on a number of factors such as the current market value, the face value, or the investment’s initial cost. Different securities will have different kinds of yields, as well.
TheStreet Explains ‘Yield’
Stocks have two kinds of dividend yields—the cost yield and the current yield. Cost yield is calculated by dividing the annual dividend by the price you paid for it. Current yield is calculated by dividing the annual dividend by its current price (rather than what you paid for it). In either case, the yield is a critical lens for assessing what you’re getting out of your original investment (no matter how long ago you bought the stock) and how your investment is doing relative to today’s market.
Bonds, on the other hand, have several more kinds of yields than stocks. The coupon, or the interest rate that was determined and fixed when the bond was issued; the current yield, or the bond interest rate expressed as a percentage of the bond’s current price; the yield to maturity, or what an investor can expect to collect if he or she holds on to the bond until its term is over; and the tax-equivalent (TE) yield, which is applicable only to municipal bonds (affectionately called “munis”) and is determined by the investor’s tax bracket. If a bond is “called” by the issuer (to refinance it, for instance) before it matures, then a “yield to call” is calculated based on the coupon rate, how long the investor held the bond, and the current market price of that bond.
Terms Related to 'Yield':
In investing, a dividend is a sum of money paid on a regular basis ...
Articles Related to 'Yield':
By Paul Price | 07/19/11 - 07:00 AM EDT
By Tim Melvin | 07/06/12 - 04:30 PM EDT
Looking at the universe of stocks we cover at Dividend Channel, in trading on Friday, shares of NRG Yield Inc were yielding above the 3% mark based on its quarterly dividend (annualized to $1.56), with the stock changing hands as low as $50.57 on the day. Dividends are particularly important for investors to consider, because historically speaking dividends have provided a considerable share of the stock market's total return.
By DividendChannel.com | 02/27/15 - 03:10 PM EST