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September 2016

What is a yield?

A yield is the income you get from an investment. It can come from either the interest received from a fixed income security such as a bond or the dividends received from a share.

Yield is normally expressed as a percentage of the asset's price. And since it measures only the income an investment earns, and disregards the capital gains or losses, the yield figure is a convenient way of comparing the returns on financial investments when you are investing for income.

The yield from a bond takes into account the fixed rate of interest the bond pays (also known as the coupon value) and the price at which the bond was purchased. For example if a €1 bond cost you €1.10 to buy, and has a 5% coupon value, that would give you a yield of 4.5% at the maturity date of the bond (1 year in this example).