What is the SEC Yield?
The SEC yield is a standard yield calculation developed by the U.S. Securities and Exchange Commission (SEC) that allows for fairer comparisons of bond funds. It is based on the most recent 30-day period covered by the fund's filings with the SEC. The yield figure reflects the dividends and interest earned during the period after the deduction of the fund's expenses. It is also referred to as the "standardized yield."
Understanding the SEC Yield
The SEC yield is used to compare bond funds because it captures the effective rate of interest an investor may receive in the future. It is widely considered a good way to compare mutual funds or exchange-traded funds (ETFs) because this yield measure is generally very consistent from month to month. The resulting yield calculation shows investors what they would earn in yield over the course of a 12-month period if the fund continued earning the same rate for the rest of the year. It is mandatory for funds to calculate this yield. This yield differs from the Distribution Yield, which is typically displayed on a bond's website.
Calculation of the SEC Yield
Most funds calculate a 30-day SEC yield on the last day of each month, though U.S. money market funds calculate and report a seven-day SEC yield. The standardized formula for the 30-day SEC yield consists of four variables:
a = interest and dividends received over the last 30-day period
b = accrued expenses over the last 30-day period, excluding reimbursem*nts
c = the average number of shares outstanding, on a daily basis, which were entitled to receive distributions
d = the maximum price per share on the day of the calculation, the last day of the period
The formula of the annualized 30-day SEC yield is:
2 x (((a - b) / (c x d) + 1) ^ 6 - 1)
Key Takeaways
- The SEC yield is a standard yield calculation developed for fair comparison of bonds.
- The yield calculation shows investors what they would earn in yield over the course of a 12-month period if the fund continued earning the same rate for the rest of the year.
Example of SEC Yield
Assume Investment Fund X earned $12,500 in dividends and $3,000 in interest. The fund also recorded $6,000 worth of expense, of which $2,000 was reimbursed. The fund has 150,000 shares entitled to receive distributions, and on the last day of the period, the day the yield is being calculated, the highest price the shares reached was $75. In this scenario, the variables equal:
a = $12,500 + $,3000 = $15,500
b = $6,000 - $2,000 = $4,000
c = 150,000
d = $75
Once these numbers are plugged into the formula, it looks like this:
30-day yield = 2 x ((($15,500 - $4,000) / (150,000 x $75) + 1) ^ 6 - 1), or 2 x (0.00615) = 1.23%
FAQs
A calculation based on a 30-day period ending on the last of the previous month. It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period. The figure listed lags by one month.
How to calculate 30-day SEC yield? ›
30-Day Yield: A standard yield calculation developed by the SEC. For bond funds, the yield is calculated by dividing the net investment income per share earned during the 30-day period by the maximum offering price per share on the last day of the 30-day period.
What is the difference between 30-day SEC yield and distribution yield? ›
Proponents of the SEC yield point to the fact that calculations for distribution yield vary between bond funds, making it an unreliable indicator of performance. Meanwhile, calculations for the SEC yield are standardized and determined by a centralized agency.
What is the formula for calculating yield? ›
For stocks, yield is calculated as a security's price increase plus dividends, divided by the purchase price.
What is 30-day div yield? ›
The 30-day yield uses the past 30 days of dividend and interest income to project the fund's income for the next 12 months, while the distribution yield takes the most recent distribution -- whether interest, dividends, or capital gains -- and multiplies that payment by 12 to get an annualized total.
What is the 30 SEC yield? ›
The U.S. Securities and Exchange Commission (SEC) developed the 30-Day SEC Yield as a standardized method for comparing bond funds. It reflects the dividends and interest earned by a mutual fund during the most recent 30-day period after deducting expenses.
What is 30-day SEC yield without waiver? ›
30-day SEC yield without waivers means the yield does not take into account a fund's expense reduction, and reflects an estimated yield to maturity.
How does SEC yield work? ›
It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the last day of the period. The figure listed lags by one month. When a dash appears, the yield available is more than 30 days old. This information is taken from fund surveys.
Should I look at SEC yield or 12 month yield? ›
In general, 12-Month Yield gives a good picture of the current yield investors are receiving from their funds. (SEC Yield, in contrast, is a good measure of the income return currently priced into a fund's bonds.)
Is SEC yield the same as yield to maturity? ›
The SEC yield plus the fund expense ratio is the yield to maturity. If two funds of the same duration and bond type have bonds with different yields to maturity, the fund holding higher-yielding bonds presumably has higher credit or call risk. Duration risk is not necessarily reflected in the SEC yield.
The formula to determine actual yield is simple: you multiply the percentage and theoretical yield together.
How do you calculate yield method? ›
The earnings yield is the inverse ratio to the price-to-earnings (P/E) ratio. The quick formula for Earnings Yield is E/P, earnings divided by price. The yield is a good ROI metric and can be used to measure a stocks rate of return.
How do you calculate mean yield? ›
To calculate the annual yield, you need to divide the total return by the initial investment and multiply it by 100 to get the annual yield as a percentage.
How to annualize 30 day yield? ›
Calculated by taking the annualized accrued net income (income less expenses, also known as the declared dividend) of the last 30 days, and dividing by the period end NAV. The net income is annualized by taking the 30 days of declared dividends, dividing by 30, and multiplying by 365.
What is the difference between current yield and SEC yield? ›
Current Yield is calculated by taking the annual coupon payment of a bond and dividing it by the bond market price. SEC Yield The SEC Yield calculation is an annualized measure of the respective fund's dividend and interest payments for the last 30 days, less the respective fund expenses.
What is the difference between SEC yield and TTM yield? ›
Investors looking for income are smart to learn the basics of analyzing the yield of a mutual fund. In summary, the TTM yield shows yield over the past year, and the 30-day SEC yield shows the most current yield (as of the last 30 days).
How do you calculate yield per month? ›
Percent Yield Formula
- = Dividends per Share / Stock Price x 100.
- = Coupon / Bond Price x 100.
- = Net Rental Income / Real Estate Value x 100 (also called “Cap Rate“)
The calculation is performed as follows: Take the net interest income earned by the fund over the last 7 days and subtract 7 days of management fees. Divide that dollar amount by the average size of the fund's investments over the same 7 days. Multiply by 365/7 to give the 7-day SEC yield.
What does a 30-day yield on an ETF mean? ›
What is a 30-day yield? The 30-day yield is based on a formula mandated by the Securities and Exchange Commission (SEC) that calculates a fund's hypothetical annualized income, as a percentage of its assets. It does not take into account the effect of changing share prices on the total return.
How do you calculate monthly yield rate? ›
Simply divide your APY by 12 (for each month of the year) to find the percent interest your account earns per month. For example: A 12% APY would give you a 1% monthly interest rate (12 divided by 12 is 1).
