What is the difference between underlying yield and distribution yield

June 11, To continue reading Cookies on the FT. The estimated gross redemption yield is a longer-term picture indicating expected annual total return. This means that in addition to expected cash income, it includes the amortised annual value of unrealised capital gains or losses of bond holdings currently held by the funds, calculated with reference to their current market price and expected redemption value made upon maturity of the bonds.

Yields are not guaranteed. Nor do they reflect the funds charges or the entry charge of the funds. Select your investor type. Financial Professional. Individual Investor. Investment themes. About us. Contact Us Login Login. Login to InvescoOnline. User Role Select your investor type. Close Clear all. You are commenting using your Facebook account. Notify me of new comments via email.

Notify me of new posts via email. Blog at WordPress. One of the best people explaining this is NFU mutual link , whereas the authoritative source in the UK is Investment Management Association IMA, link , link Historic Yield is last 12 months, for equity funds Distribution Yield is next 12 months, for bond funds Underlying Yield is next 12 months, for bond funds, including the purchase price and expense.

Like this: Like Loading Leave a Comment. The more popular version though, and the version used by First Asset, is the forward dividend yield often stated as just dividend yield , but also known as current dividend yield or indicated yield. This version takes the most recently paid dividend amount and assumes that it will remain constant over the coming year. In other words, because dividends are typically paid on a quarterly basis, the most recent dividend is multiplied by 4 and then divided by the most recent NAV.

Because distributions, by definition, are amounts payable to investors, any time you see a published distribution yield, it will almost always be a net yield — that is, it has already been reduced to factor in expenses and taxes payable by the ETF. It attempts to show how much return the ETF could expect to generate over the course of the coming 12 months from its underlying bond cash flows, assuming current bond prices remain constant.

Current yield is more relevant for investors with shorter -term time horizons. The disadvantage, however, is that bond prices change constantly, so this is a less accurate measure relative to yield to maturity.