Yield

Business, Legal & Accounting Glossary

Definition: Yield


Yield

Quick Summary of Yield


The annual income provided by an investment.




What is the dictionary definition of Yield?

Dictionary Definition


The annual income earned from an investment usually expressed as a percentage of the money invested.

  1. obsolete Payment; tribute.
  2. A product; the quantity of something produced.
  3. law The current return as a percentage of the price of a stock or bond.
  • The income from an investment expressed in various ways.
  • The nominal yield of a fixed-interest security is the interest it pays; expressed as a % of its par value.
  • The current yield (interest yield, earnings yield, running yield, or flat yield) however, depends on the market price of the stock.
  • The income obtained from a tax.

Full Definition of Yield


Yield is the annual return you receive from holding a stock, share or unit trust – it is expressed as a percentage of its price.

In general, the yield is a term that defines a return on a capital investment of various forms. Typically, the yield is expressed as a percentage and is used as an annual figure. An example of yield would be an investment in real estate or a business deal that generates a ten per cent return. It is then said that that investment yielded a ten per cent return.

In the stock market yield essentially communicates a rate of return made form an investment in common and preferred stocks. This particular yield comes in the form of a dividend and is also called dividend yield. Yield is also a function of the bond market. One of its applications is current yield, which is a coupon rate of interest divided by the bond’s purchase price. Additionally, yield is a rate of return on a bond that takes into account the sum annual interest payment, the purchase price, the redemption value, as well as the time period remaining until maturity. This is also referred to as maturity yield or yield to maturity.

In the case of shares, the yield is calculated by expressing the dividend as a percentage of the cost of the investment.

To calculate the yield on a share, take the dividend paid (this will be net of the basic rate of tax), add back the tax to get the gross yield and then divide by the share price and multiply by 100. In simple terms, if you buy shares in (say) General Trading Company and the gross dividend is 5 pence and the shares are 100 pence, your yield is 5%.

Yield can be an important consideration when investing. Some companies have a policy of maximising their dividend payouts, others are more concerned to retain all or most of the profits for re-investment.

In the case of fixed interest stock, such as gilts, the return is a specified rate of interest. But there may also be a capital gain or loss to take into account if the investor holds the stock until maturity when it is redeemed by the issuer at face value. This is why it’s important to consider two gilt yield figures, the interest yield and the redemption yield.

Annual Percentage Yield

Annual percentage yield is effectively an annual rate of return that takes into account the impact made by compounding interest. It is calculated with the help of the following formula:

Annual percentage yield = (1 + periodic rate) # periods -1

Current Yield

Current yield may be explained in economic terms as a result of the division of yearly income by the present price of a particular security. In the case of stocks, the current yield is also referred to as dividend yield and bond yield. It is computed by using the following formula:

Current yield = annual cash inflows/market price

Dividend Yield

The dividend yield is a financial ratio. It basically provides details of payments made by business establishments in terms of prices of shares issued by themselves. In case there is no capital gain, the dividend yield is regarded as a return on investment for a share. Following is an equational representation of dividend yield:

Dividend yield = yearly dividends per share/price of each share


Examples of Yield in a sentence


Higher-rate deposit accounts tend to yield good returns.


Related Phrases


Annual percentage yield
Average dividend yield
Bond equivalent yield
Capital gains yield
Convenience yield
Cost yield
Coupon equivalent yield
Current yield
Dividend yield
Dividend yield funds
Dividend yield stocks
Earnings yield
Effective annual yield
Equivalent bond yield
Equivalent taxable yield
Flat yield curve
Flattening of the yield curve
High yield
High yield bond
Indicated yield
Inverted yield curve
Liquid yield option note
Negative yield curve
Nominal yield
Non-parallel shift in the yield curve
Normal yield curve
Parallel shift in the yield curve
Positive yield curve
Potential average dividend yield
Pure yield pickup swap
Realized compound yield
Realized yield
Relative yield spread
Reoffering yield
Required yield
Riding the yield curve
Stated yield
Steepening of the yield curve
Weighted average portfolio yield
Yield burning
Yield curve
Yield curve option pricing models
Yield curve strategies
Yield ratio
Yield spread strategies
Yield to call
Yield to call, option or event date
Yield to maturity
Yield to worst


Yield FAQ's


What does Yield mean?

The rate of annual income return on an investment, expressed as a percentage. Yield does not include capital gains. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.

The yield is the rate of return that investors require from the bond. Equivalently, it is the rate of return that they require from bonds of similar risk.

(1) The amount of interest paid on a bond or stock divided by the price; a measure of the income generated by the security. (2) The rate of return on an investment, usually expressed as an annual percentage rate. A yield is not a total return measure because it does not include capital gains or losses. See also: Current Yield; Dividend Yield; Nominal Yield.

The percentage rate of return paid on a stock in the form of dividends, or the effective rate of interest paid on a bond or note.

Is the rate of return on an asset. It is frequently expressed as a percent of the current market price.

How Is Yield Calculated?

At its simplest, yield is how much money an investment earns. “I invested $1,000 and earned $500.” (So the total value of that investment would be $1,500.) However, it’s usually expressed as a percentage: “I earned 50%!”

More often, it is talked about per period of time, such as a year. If that 500 bucks had been earned over three years, then you could say “I earned 14.5% per year!” ($1,000 x 1.145 x 1.145 x 1.145 = $1,501) (To determine how to figure out what that annual yield is, see compounded annual return.)

The yield or “rate of return” can refer to several things. Among these are:

Annual percentage yield, such as on a certificate of deposit (CD) or savings account
Dividend yield, based on the dividend rate paid out at the time a stock is purchased
Bond yield, which is the interest rate a bond pays out.

The word can be used in many other contexts, such as “expected yield,” “high yield,” and “minimum yield.”

It comes from one meaning of yield — to give up. Not as “to quit,” but to give or to put forth, as in “He planted trees which yielded fruit.”

What is Yield in Finance?

Yield is a term that refers to the rate of return on an investment, which is typically stated as a percentage of the initial investment. The investor’s principal worry, along with the risk of loss connected with an investment, is the yield on the investment.

Yield is frequently expressed as an annualised figure. Thus, if an investment yields $100 on a $1,000 investment after three months, it is regarded to have a 40% annualised yield (the actual 10 percent return multiplied by four quarters).

The yield calculation should take into account unrealized gains or losses on investments that an investor continues to hold (such as bonds or stock); otherwise, the yield calculation will be based solely on dividends or interest payments, and thus will not provide a complete picture of the investor’s return on investment.

When investing in a fund, the yield is determined as the fund’s income less fund expenses divided by the investment.

What is Yield in Manufacturing?

In a manufacturing process, yield refers to the proportion of inputs that are actually included in the final output. Reduced scrap generated by a process results in increased yield, which results in increased earnings. Concentrating on meeting six sigma quality standards is one of the most effective strategies for increasing production yield.


Cite Term


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September 24, 2022 https://payrollheaven.com/define/yield/.
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https://payrollheaven.com/define/yield/ (accessed: September 24, 2022).
American Psychological Association (APA):
Yield. PayrollHeaven.com. Retrieved September 24, 2022
, from PayrollHeaven.com website: https://payrollheaven.com/define/yield/

Definition Sources


Definitions for Yield are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 13th April, 2022 | 0 Views.