Current Yield

Annual income (interest or dividends) divided by the current price of the security. This measure looks at the current price of a bond instead of its face value and represents the return an investor would expect if he or she purchased the bond and held it for a year. This measure is not an accurate reflection of the actual return that an investor will receive in all cases because bond and stock prices are constantly changing due to market factors.



Also referred to as "bond yield", or "dividend yield" for stocks.

Investopedia Says:
For example, if a bond is priced at $95.75 and has an annual coupon of $5.10, the current yield of the bond is 5.33%. If the bond is a 10-year bond with nine years remaining and you were only planning to hold it for one year, you would receive the $5.10, but your actual return would depend on the bond's price when you sold it. If, during this period, interest rates rose and the price of your bond fell to $87.34, your actual return for the period would be -3.5% (-$3.31/$95.75) because although you gained $5.10 in dividends, your capital loss was $8.41.

Related Links:
Offering both income and relative security, these uncommon shares may work for you. A Primer On Preferred Stocks
Despite their reputation, the debt securities known as "junk bonds" may actually reduce risk in your portfolio. High Yield, Or Just High Risk?
Investing in bonds - What are they, and do they belong in your portfolio? Bond Basics Tutorial
Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration. Advanced Bond Concepts

Annual interest on a bond divided by the market price. It is the actual income rate of return as opposed to the coupon rate (the two would be equal if the bond were bought at par) or the yield to maturity. For example, a 10% (coupon rate) bond with a face (or par) value of $1,000 is bought at a market price of $800. The annual income from the bond is $100. But since only $800 was paid for the bond, the current yield is $100 divided by $800, or 121⁄2%.

A measurement of investment returns based on the percentage relationship of annual cash income to the investment cost. The formula is

Current yield = current income

investment cost
Example: Abel purchases a parking lot for $10,000. It provides $5,000 of parking revenues each year. Property taxes and insurance total $3,500, leaving $1,500 of annual before-income-tax Cash Flow. The current yield is 15%:

$1,500 = 15%

$10,000

See also Yield to Maturity.

This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)