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Home > QFINANCE Dictionary > Definition of yield

Definition of


Stockholding & Investments

percentage that is annual income from investment a percentage of the amount invested that is the annual income from an investment.

Yield is calculated by dividing the annual cash return by the current share price and expressing that as a percentage.

Yields can be compared against the market average or against a sector average, which in turn gives an idea of the relative value of the share against its peers. Other things being equal, a higher yield share is preferable to that of an identical company with a lower yield.

An additional feature of the yield (unlike many of the other share analysis ratios) is that it enables comparison with cash. Cash placed in an interest-bearing source like a bank account or a government stock produces a yield—the annual interest payable. This is usually a safe investment. The yield from this cash investment can be compared with the yield on shares, which are far riskier. This produces a valuable basis for share evaluation.

Share yield is less reliable than bank interest or government stock interest yield, because, unlike banks paying interest, companies are under no obligation at all to pay dividends. Frequently, if they go through a bad patch, even the largest companies will cut dividends or abandon paying them altogether.

Definitions of ’yield’ and meaning of ’yield’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’yield’ and other financial terms with our online QFINANCE Financial Dictionary.

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