Income · Other

Effective Yields – Revisited

Yield   Take a look at my posting of November 11, 2013 that explains the difference between “today’s yield” and what I refer to as the “effective yield”. To summarize, if you were to receive the current payout based on the prices used when entered into the portfolio (i.e. purchase price), there would be a fairly significant difference in what an investor is earning on the original investment vs. someone who is acquiring the shares today. For this exercise, I am using current share prices for the companies in the income portfolio and the annualized dividend payments for each candidate to calculate the current yield and the price when entered into the portfolio to provide the effective rate of return. The same calculations can be done for the conservative and aggressive portfolios for companies paying dividends in those accounts. The exchange traded funds tend to payout dividends based on earnings for the previous quarter plus capital gains and sometimes year-end returns of capital, so I am using an average for the past year in the calculation to smooth out quarterly gyrations and special year-end dividends. From my posting on this subject in February, a number of companies and funds have reduced their payouts due to industry conditions (such as lower energy prices) and some share prices are now lower than they were in the beginning of the year and in some case below the acquisition price. So the “picture”, unfortunately for some of the entries is not as rosy. Here’s a look.


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