Yield
Yield measures the income an investment generates relative to its current value or purchase price.
1 min read Learning to Invest
What it means
Yield measures the income an investment generates relative to its current value or purchase price. It's commonly used for bonds and dividend-paying shares to compare how much income different investments produce.
Example
A bond paying £40 per year that currently costs £800 has a higher yield than the same bond costing £1,000.
Why it matters
Yield helps you compare investments that generate income, rather than simply looking at the cash amount they pay.
A high yield can sometimes be a sign that investors think the investment has become riskier.
Why is yield different from the income paid?
Yield considers both the income and the current value of the investment, making it easier to compare different investments.