Metricsyield

Yield

Also known as Dividend Yield, Distribution Yield, Current Yield

Mikael Andersson
Mikael Andersson
VC Analyst · Updated

Yield is the income return on an investment over a period, expressed as a percentage of price or NAV. Dividend yield divides annual dividends per share by share price. Distribution yield, used for funds and REITs, annualizes recent distributions and divides by NAV.

Formula

Dividend Yield = Annual Dividends per Share / Price per Share
Annual Dividends per Share
Sum of cash dividends declared over the trailing twelve months for one share
Price per Share
Current market price of the share, or the NAV per unit for a fund

In depth

Yield is the periodic income an investment produces, normalized by what was paid for it. The three forms that matter in institutional reporting are dividend yield, distribution yield, and 30-day SEC yield.

Dividend yield applies to common stock. It divides the trailing twelve-month cash dividend per share by the current share price. Dividend yield moves inversely with price: when the share price falls, yield mechanically rises even though the underlying business has not changed.

Distribution yield applies to funds, ETFs, and REITs that distribute cash to investors. The standard form annualizes the most recent distribution (usually by multiplying by 12 for monthly distributors) and divides by NAV. It includes income, realized gains, and return of capital, which is why it often runs higher than the underlying earnings yield.

30-day SEC yield is a regulator-defined formula that captures only net investment income earned over the prior 30 days, annualized and divided by the maximum offering price. It excludes return of capital and is the closest thing to an apples-to-apples comparison across funds.

Why it matters

Yield is the primary return mechanism in cash-distributing strategies: private credit, infrastructure, real estate, secondaries, and dividend-focused public equity. Venture capital almost never produces yield during the fund life; LPs are buying the eventual capital gain. The implication is that yield is the right return measure for some strategies and the wrong one for others. Comparing a venture fund's 0% interim yield to a credit fund's 8% distribution yield without context conflates two unrelated return profiles.

Worked example

A REIT trading at $42 per share pays four quarterly distributions totaling $2.10 over the trailing year:

Dividend yield = $2.10 / $42.00 = 5.0%

The same REIT later reports its 30-day SEC yield at 4.2%. The gap of 80 basis points comes from return of capital being included in the headline distribution but excluded from the SEC calculation. The investor receives the 5.0% distribution yield in cash, but only 4.2% represents net investment income; the remaining 0.8% is principal flowing back, not earnings.

Frequently asked

How is yield different from total return?

Yield is only the income component. Total return adds capital appreciation or depreciation. A stock paying a 4% dividend that also rose 10% delivered a 4% yield but a 14% total return. Yield-focused investors care about cash income; total-return investors care about both.

What is the difference between distribution yield and 30-day SEC yield?

Distribution yield annualizes the most recent distribution and divides by NAV, including return of capital. The 30-day SEC yield is a standardized calculation defined by the SEC that captures only net investment income earned over the prior 30 days, divided by the maximum offering price. SEC yield is harder to game; distribution yield is more inclusive.

Why does yield rarely show up in venture capital reporting?

Venture funds almost never distribute cash before an exit, so there is no income stream to yield against. Yield becomes relevant in private equity secondaries, private credit, real estate funds, and infrastructure funds, where cash distributions during the hold period are the primary return mechanism.

Can yield be misleading?

Yes. A high yield often signals a falling price rather than a strong income stream: when a stock drops 30%, its trailing dividend yield mechanically rises 43%. Distribution yields that include return of capital also overstate true income, because part of the payment is the investor's own principal being handed back.

Sources & further reading