Yield is the income generated by an investment, usually expressed as a percentage of its current price or value. It is commonly used to measure the return from assets such as stocks, bonds, or real estate.
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Yield represents the income return an investor earns relative to the value of an investment.
In financial markets, yield is most often associated with interest or dividend payments. For example, bond yield reflects the interest income an investor receives, while dividend yield shows how much income a stock pays relative to its share price. Yield can change over time as market prices fluctuate or as income payments are adjusted. Investors use yield to compare different investments and assess income potential, especially in income focused strategies. However, a high yield may also indicate higher risk, such as financial instability or declining asset prices, so it should always be evaluated alongside other factors.
Short example:
Suppose a stock pays an annual dividend of $4 and is currently priced at $100.
The dividend yield is 4 percent.
If the stock price falls to $80 while the dividend remains the same, the yield increases to 5 percent.
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