Definition
Yield is the income return on an investment, expressed as a percentage of the investment\'s cost, market value, or face value. It represents the earnings generated from an investment over a specific period, excluding capital gains. Common types include dividend yield for stocks, coupon yield for bonds, and rental yield for real estate. Yield is a key metric for income-focused investors and is typically quoted on an annual basis.
Formula
For stocks: (Annual Dividends Per Share / Share Price) × 100. For bonds: (Annual Coupon Payment / Face Value) × 100.
Example
Dividend Yield Example
If a stock trades at $100 per share and pays $4 in annual dividends, the dividend yield is 4%. If you invest $10,000 in this stock, you would receive $400 annually in dividend income. If the company raises its dividend to $5 while the stock price remains $100, your yield becomes 5% and your annual income increases to $500.