DEFINITION of ‘Mutual Fund Yield’
Dividend payments divided by the value of a mutual fund’s shares. Mutual fund yield is different from a fund’s market value, which is typically determined after the market closes each day and the fund reconciles its positions. It is also different from the fund’s return, which takes into account both dividend payments and changes in share price.
BREAKING DOWN ‘Mutual Fund Yield’
For example, assume that a mutual fund has a current market price of $20 per share, and paid $0.50 in dividends over the year. Mutual fund yield would be calculated by dividing the dividends paid by the share price. Thus the yield would be $0.50 / $20 = 0.025, or 2.5%.
Investors planning on living off of dividends are most likely to pay attention to mutual fund yield, which is not as detailed as a mutual fund’s return. Because mutual funds do not pay dividends daily, looking at when the fund has paid the dividends (and how much those dividends were) can give the investor an idea of how healthy the fund is. A fund that has a particularly good quarter and pays significantly more dividends during that time may boost the yield for the entire year, which can be misleading if the other quarters saw lower dividend payments.