Glossary - Yield
Yield refers to the earnings generated and realized on an investment over a particular period of time. It is typically expressed as a percentage of the investment's cost, its current market value, or its face value. Yield is a key component in assessing the return on investment (ROI) for both stocks and bonds, with its calculation varying depending on the type of investment. For bonds, yield is a function of the bond's price, its coupon payments, and its time to maturity. In the context of stocks, yield often refers to the dividend yield, which is the annual dividend payment compared to the stock's current price.
Also known as
- Return on Investment (ROI)
- Interest Rate
- Dividend Yield
Use cases examples
- Bond Prospectus: The yield to maturity (YTM) indicated in the bond prospectus provides potential investors with an estimate of the return they can expect if they hold the bond until its maturity date.
- Annual Report: The company's annual report highlights its dividend yield, demonstrating the percentage of return shareholders might expect in relation to the stock's price.
Considerations for investors
- Investors should carefully assess the yield of their investments, considering both the risks involved and the time horizon, particularly with fixed-income securities where yield can significantly affect returns.
- In periods of low interest rates, investors should be wary of investments offering significantly higher yields than the market average, as this may indicate higher risk.
Considerations for founders
- Founders should understand the implications of yield in the context of debt financing, as higher yield requirements from investors indicate higher borrowing costs.
- When issuing dividend-yielding stocks, founders must balance the desire to provide returns to shareholders with the need to reinvest profits into the business for growth.
Get to know our world class tools and services
Transform your operations with world class tools
We have created several tools to help investors spot the best opportunities and manage their portfolio.
Let's unlock your business potential with Automations
Embrace the future with our tailored subscription service that combines strategic planning and practical implementation.