Effective Yield – Revisited

YieldYou may want to refer to my original 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. Price When Added), 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 added into the portfolio to provide the effective yield. 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 the latest annualized payouts in the calculations. Some notable examples are Johnson & Johnson, Kimberly-Clark, Dow Chemical and the Select SPDR Utilities, with rising dividends and higher share prices, the effective yields are considerably better for those who invested on the entry date vs. what the yield is as of today. However, the reverse is true for some of the energy-related shares that have not fared as well, such as the ETRACS Alerian MLP Index and Total, SA., so the “picture”, unfortunately for some of the entries is not as rosy. Take a look:


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