Yield
InvestmentsYield is the earnings generated from an investment over a period, expressed as a percentage of the investment's cost or current market value. Different instruments have different yield measures: dividend yield for stocks, current yield and YTM for bonds, and rental yield for real estate.
In detail
Types of yield:
Dividend yield: annual dividend / current share price x 100. A stock paying Rs 20/year dividend at Rs 400 price = 5% dividend yield.
Current yield (bonds): annual coupon / current bond price x 100.
Yield to maturity (YTM): total return if bond is held to maturity -- includes interest payments + capital gain/loss from price vs face value.
Rental yield: annual rent / property value x 100. A Rs 50L property generating Rs 20,000/month rent = Rs 2.4L/year = 4.8% yield.
Formula
Real-life example
Mumbai residential property purchased for Rs 1.5 Cr generates Rs 30,000/month rent = Rs 3.6L/year. Rental yield = 3.6/150 x 100 = 2.4%. Compare with FD at 7% or SGB at 8.2% + gold appreciation. Low rental yield in Indian metro real estate is the key argument for investing in financial assets alongside or instead of property.