what yield can tell you
a higher yield value indicates that an investor is getting more cash flow from holding an investment but it s not that straightforward since dividends are paid from a company s profits higher dividend payouts should mean the company s earnings are increasing which could lead the stock s market price to rise but a higher yield in a company s stock dividend may suggest that the company s management is compensating for a falling or stagnant market value of the stock in fact the higher yield may indicate that the stock value used in the formula had declined similarly in bonds a higher than average yield in a bond indicates a higher than average degree of risk attached to the investment the company or government body issuing the bond has to pay higher interest to attract investors types of yieldsyields on investments vary based on the type of security the duration of investment and the return amount for stock based investments two types of yields are popularly used when calculated based on the purchase price the yield is called yield on cost yoc or cost yield and is calculated as for example if an investor realized a profit of 20 120 100 resulting from price rise and also gained 2 from a dividend paid by the company therefore the cost yield comes to 20 2 100 0 22 or 22 however many investors may like to calculate the yield based on the current market price instead of the purchase price this yield is referred to as the current yield and is calculated as for example the current yield comes to 20 2 120 0 1833 or 18 33 