Yield

Yield tells you how much income an investment generates relative to its price. It's the "cash flow return" separate from price appreciation.

Types of Yield:

Dividend Yield (Stocks):

• Formula: (Annual Dividends ÷ Stock Price) × 100
• Example: Stock at $100 pays $4/year = 4% yield
• High dividend stocks: 3-6% yield
• Growth stocks: 0-2% yield

Bond Yield:

• Current Yield: (Annual Interest ÷ Current Price) × 100
• Yield to Maturity: Total return if held to maturity
• Example: $1,000 bond paying $50/year at current price $950 = 5.26% current yield

Savings Account Yield (APY):

• High-yield savings: 4-5% in 2025
• Traditional savings: 0.01-0.5%

Rental Property Yield:

• Cap Rate: (Annual Net Income ÷ Property Value) × 100
• Example: Property worth $500,000 generates $30,000/year = 6% cap rate

Key Insight: Higher yields usually mean higher risk. A 10% bond yield likely means the company is risky. A 7% dividend yield might signal the stock price has crashed or the dividend is unsustainable.

Yield vs. Total Return: Yield is just income. Total return includes price appreciation. A 2% dividend yield stock that grows 15%/year has a 17% total return.