Income Yield Vs Total Return

Yield isn t the only way to generate income from a portfolio and in many cases it may not be the most efficient especially when taxable accounts are involved.

Income yield vs total return. This week i met with retired investors who owned yield focused portfolios. Return is the financial gain or loss on an investment. Total return or income. These investors truly meant well but were unsure of what it meant to compare total return vs.

Income including interest paid by fixed income investments distributions or dividends and capital appreciation representing the change in the. If a fund that yields 5 also has a 5 increase in its share price its total return is 10. To spend income to adopt a total return approach provided the commission s consent was received. Tax implications of yield vs.

The dividend yield is a financial ratio that represents the dividend income per share divided by the price per share. Those who have struggled to grow their money in the low interest rate environment over the past decade have mainly been retirees and others who invest for income. Total return accounts for two categories of return. Yield measures the income such as interest and dividends from an investment and is expressed as a percentage.

In some cases these strategies are the same. Prefer greater control over cashflow patterns. Total return income approaches. For example a stock priced at 100 per share that receives a dividend.

In a given year these fluctuations can cause the total return to be higher or lower than the fund s yield. The total return strategy isn t restricted to chasing income or price appreciation. For example investors who. A capital loss can offset the additional yield with just a.

More recently it has introduced a new regime which allows the 14 000 or so permanently endowed charities in the uk to take a total return approach if the trustees pass an appropriate resolution. If the same fund experiences a 5 decline in its share price the total return is 0.