SEC Yield (2024)

FAQs

What is SEC yield vs dividend yield? ›

The SEC yield is an annualized figure based on returns over the most recent 30-day period. As outlined above, the distribution yield, on the other hand, takes the most recent distribution, multiplies it by 12 to get an annualized total, and then divides the result by the NAV.

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.)

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 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.

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.

“SEC Yield” reflects the interest the fund earned, minus expenses, over the past 30 days. It's fairer and more accurate calculation of what's current and ahead than is the trailing twelve-month (TTM) yield. With the SEC calculation, we're changing our focus from the back of the car mirror to the road ahead.

SEC yield is a trailing 30-day average yield to maturity (YTM) of the bonds in the fund. Distribution yield is the annualized value of the most recent distribution per share divided by the average share price over the previous month. It's easier to understand by looking at the analogous yields of an individual bond.

Because the SEC yield uses historical purchase price in its calculation (vs. current pricing for YTM), it causes yields for funds holding securitized bonds to be artificially lower than they actually are and not a true indicator of their future return potential.

Are Treasury bonds a good investment? Generally, yes, but that depends on your investing goals, your risk tolerance and your portfolio's makeup. With investing, in many cases, the higher the risk, the higher the potential return.

7-DAY CURRENT YIELD

The yield may differ slightly from the actual distribution rate of a given portfolio because of the exclusion of distributed capital gains or losses which are non-recurring. The SEC Yield is a required yield to quote to clients. This yield does not allow for the inclusion of capital gains or losses.

Does a 30-day yield pay every 30 days? ›

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.

Here's what this yield essentially means: If you (or the fund manager) were to hold to maturity each and every one of the bonds in a fund's portfolio, as it stood over the past 30 days, and reinvest all interest payments (that is, you plow those interest payments right back into your bond portfolio), your SEC yield is ...

The 30-day SEC yield would reflect the new (higher) yields, but the ETF would continue paying dividends based on the yield when it bought the bond. An example may help make this more clear.

Instead, if a fund's current 30-Day SEC Yield is significantly higher than its 12-month distribution rate, it may signal that the fund has added higher-yielding securities with more credit risk, longer maturities, or both.