30-Day SEC Yield Calculator

| Added in Business Finance

What is SEC Yield and Why Should You Care?

The SEC (Securities and Exchange Commission) yield is a standardized way to assess the income-generating ability of bond funds. Think of it as giving you an insightful snapshot of a bond fund's income over a 30-day period.

It's particularly useful when comparing different bond funds, as it standardizes yields to help you make an apples-to-apples comparison. This is valuable if you're looking to park your money where it's going to generate steady, predictable returns.

Knowing the SEC yield can help you make more educated investment choices. It offers a more accurate picture of your potential income, taking into account the interest and dividends received minus accrued expenses. If you're someone who likes their investments to be predictable, then knowing a fund's SEC yield is crucial.

How to Calculate SEC Yield

The SEC yield involves a specific formula:

[\text{SEC Yield} = 2 \cdot \left( \left( \frac{\text{Interest and Dividends} - \text{Accrued Expenses}}{\text{Average Shares} \times \text{Max Price}} + 1 \right)^{6} - 1 \right)]

Where:

  • Interest and Dividends: The total amount received over the last 30 days
  • Accrued Expenses: Expenses accumulated over the same 30-day period
  • Average Number of Outstanding Shares: The average number of shares outstanding on a daily basis
  • Maximum Price Per Share: The highest price per share on the last day of the calculation period

Calculation Example

Let's work through an example:

  1. Interest and Dividends: $5,000 received over the last 30 days
  2. Accrued Expenses: $2,500 in expenses
  3. Average Number of Outstanding Shares: 2,000 shares on average
  4. Maximum Price Per Share: $3 per share

Plugging these numbers into our formula:

[\text{SEC Yield} = 2 \cdot \left( \left( \frac{5000 - 2500}{2000 \times 3} + 1 \right)^{6} - 1 \right)]

First, calculate the inner fraction:

[\frac{2500}{6000} = 0.4167]

Next, add 1 to the result:

[0.4167 + 1 = 1.4167]

Raise this result to the power of 6:

[1.4167^{6} = 8.084]

Now subtract 1:

[8.084 - 1 = 7.084]

Finally, multiply by 2:

[7.084 \times 2 = 14.17]

So, in this example, the SEC Yield is approximately 14.17%.

Parameter Value
Interest and Dividends $5,000
Accrued Expenses $2,500
Average Outstanding Shares 2,000
Maximum Price Per Share $3
SEC Yield 14.17%

Quick Tips

  • Use SEC Yield for comparisons: It provides a standardized metric across different bond funds
  • Consider expenses: SEC Yield already accounts for accrued expenses, giving you a clearer picture of net income
  • Combine with other metrics: While SEC Yield is useful, also consider total return, expense ratios, and fund objectives

Frequently Asked Questions

SEC Yield is a standardized metric developed by the Securities and Exchange Commission to assess the income-generating ability of bond funds over a 30-day period.

SEC Yield standardizes how yields are calculated across different bond funds, allowing for an apples-to-apples comparison when evaluating investment options.

A higher SEC Yield indicates the bond fund is generating more income relative to its share price, suggesting potentially better returns for income-focused investors.

SEC Yield uses a standardized 30-day calculation that accounts for expenses, while distribution yield may vary based on how funds report their distributions.