Investment Rate Yield Calculator
Calculate the annual yield percentage based on asset price and income.
Understanding the Rate Yield
The rate yield is a fundamental metric used by investors to measure the income generated by an investment relative to its price. Unlike total return, which includes capital gains (price appreciation), the yield focuses strictly on the cash flow produced—such as dividends from stocks or interest payments from bonds.
How to Use the Rate Yield Calculator
To use this tool effectively, you need two primary pieces of data:
- Annual Income: The total amount of cash the investment pays out over one year. For a stock, this is the sum of all quarterly dividends. For a bond, it is the annual coupon payment.
- Asset Price: Depending on your goal, you can use the original purchase price (to calculate "yield on cost") or the current market price (to calculate "current yield").
The Rate Yield Formula
The calculation is straightforward but provides powerful insights into investment efficiency:
Examples of Yield Calculations
Example 1: Dividend Stock
Suppose you own shares of a company trading at 150 per share. If the company pays a total of 6 in dividends per share annually, your yield is:
(6 / 150) * 100 = 4.00%.
Example 2: Fixed Income Bond
If you buy a bond for 950 that pays 50 in interest annually, the yield is:
(50 / 950) * 100 = 5.26%.
Why Yield Matters to Investors
Yield is crucial for income-focused investors, such as retirees, who rely on their portfolio to cover living expenses. A higher yield indicates more cash flow per dollar invested. However, investors must be cautious: an exceptionally high yield can sometimes signal that the asset price has crashed due to underlying risks or that the dividend is unsustainable.
Current Yield vs. Yield on Cost
Our calculator can be used for both metrics:
- Current Yield: Use the current market price. This tells you what a new investor would earn today.
- Yield on Cost: Use the price you originally paid. This shows the productivity of your initial capital as the asset grows over time.