What is yield?
A yield is the return on an investment, either in terms of dividends for shares or interest payments. It is expressed as a percentage of the cost of the financial instrument in question, but unlike return it does not include any capital gain arising from a rise in the market value of the asset.
Where have you heard about yield?
As an investor, you may have had discussions with your financial adviser about the yield on this or that investment, with high-yielding assets being much in demand. Financial news media often list the yield figure for individual shares alongside the current price.
What you need to know about yield.
Yield tells you the return on a financial asset in terms of the income it generates, such as dividends, once the price has been taken into account. Yield moves in the opposite direction to the price. Thus a high-yielding stock is one in which the investor has paid less for a certain amount of income than has an investor in a low-yielding stock.
Yield is related to risk, thus shares in utility companies or bonds issued by the German government are low-risk and low-yield, whereas 'junk bonds' issued by risky companies are known also as 'high-yield bonds'.
Find out more about yield.
Yield is one way to measure how an asset has performed or is likely to. To learn about another, see our definition of annual total return.