Fund Yield
Generally, a fund’s yield is whatever it pays out during the year in dividends and interest. For example, if a fund is selling for $20 a share and paid out $1 in dividends and interest payments, its yield would be 5%. Because a fund’s investments and its payouts change over time, advisors need to understand the difference between its 12-month yield and the SEC yield.
The advantage of using the 12-month yield is that it reflects exactly what the ETF or mutual fund paid out over the past year and divides this amount by the fund’s current NAV. The disadvantage is that the fund may have a different payout for the upcoming 12-month period (i.e., it sells some high-yield securities).
The SEC yield reflects what the fund has paid out in interest and dividends over the past 30 days and then annualizes that figure. The measurement is more accurate for fixed-income funds since equity funds own stocks that tend to have “lumpy” payouts—bigger payouts near the end of the year or quarter.