SEC 30-Day Yield vs Distribution Yield: Wetin E Mean

SEC SEC 30-day yield and distribution yield na two different measurements for the same fund, and fund page often show one without clearly talk which one e be. SEC 30-day yield na standardized figure wey regulation define: na the income wey the fund holdings earn for the most recent 30 days, after fund expenses don comot, then annualized. Distribution yield na the cash wey fund actually pay out, measured against the current share price. Dem answer different questions. If you put both for the same column inside comparison table, e easy make person reach wrong conclusion about which fund dey pay more.

The three yield numbers wey fund page fit show

1. SEC 30-day yield, wey dem also dey call standardized yield. Fund go take interest and dividend income wey the holdings earn for the last 30 days, remove expenses wey dem charge for that period, divide am by the maximum offering price for the final day, then annualize am with formula wey SEC prescribe. Every fund dey use the same formula for the same length of period. Na wetin make the number comparable from one fund to another.

1. Trailing twelve-month distribution yield. Add every per-share distribution wey fund pay for the last twelve months, then divide am by the current share price. Na record of cash wey don already move.

1. Forward, indicated, or annualized distribution yield. Take the latest distribution, multiply am by the number of payments wey fund make for one year, then divide am by price. Na one payment dey carry the whole estimate.

The arithmetic dey the same for all three cases: annual dollars divided by price. Na the same calculation wey dem explain for how to calculate dividend yield. The difference dey entirely inside the numerator. The first number count income wey portfolio earn. The other two count cash wey fund pay out. Nothing say both amounts must be the same.

SEC 30-day yield versus distribution yield, side by side

SEC figure dey come from fund own accrual records, and dem dey publish am for the fund documents. So, nobody outside the fund fit rebuild am from market prices. You fit rebuild both distribution yields. The panel below calculate dem for some widely held ETFs, using the distributions wey each one actually pay for the last twelve months and the latest closing price.

WITH
    px AS
    (
        SELECT
            ticker,
            argMax(toFloat64(close), date) AS last_close
        FROM global_markets.stocks_daily_aggs
        WHERE ticker IN ('SPY', 'SCHD', 'VYM', 'QQQ', 'TLT', 'JEPI')
          AND date >= today() - 30
        GROUP BY ticker
    ),
    paid AS
    (
        SELECT
            fund_ticker       AS ticker,
            sum(cash)         AS ttm_cash,
            argMax(cash, exd) AS latest_cash,
            argMax(freq, exd) AS pays_per_year
        FROM
        (
            SELECT
                any(ticker)                 AS fund_ticker,
                any(toFloat64(cash_amount)) AS cash,
                any(ex_dividend_date)       AS exd,
                any(toUInt16(frequency))    AS freq
            FROM global_markets.stocks_dividends
            WHERE ticker IN ('SPY', 'SCHD', 'VYM', 'QQQ', 'TLT', 'JEPI')
              AND ex_dividend_date > today() - 365
              AND ex_dividend_date <= today()
              AND toUInt16(frequency) > 0
            GROUP BY id
        )
        GROUP BY fund_ticker
    )
SELECT
    p.ticker                                                       AS fund,
    round((100 * p.ttm_cash) / x.last_close, 2)                    AS ttm_distribution_yield_pct,
    round((100 * p.latest_cash * p.pays_per_year) / x.last_close, 2) AS indicated_yield_pct,
    round(abs(((100 * p.latest_cash * p.pays_per_year) / x.last_close)
              - ((100 * p.ttm_cash) / x.last_close)), 2)           AS gap_pct
FROM paid AS p
INNER JOIN px AS x ON x.ticker = p.ticker
ORDER BY gap_pct DESC, fund ASC

Among the 6 funds for here, we arrange dem by how far the two figures dey from each other. JEPI dey top, with trailing twelve-month distribution yield of 7.95% versus indicated yield of 7.64%. The difference na 0.31 percentage points. For the other end of the panel, SPY prints 0.98% and 0.99%, with distance of 0.01 points. Same day, same prices, same formula. The only thing wey change na the payments wey enter the numerator.

Wetín dey happen after fund increase its payout

Indicated yield dey reprice immediately when bigger distribution go ex-dividend. Trailing twelve-month yield need full year before the last older, smaller payments comot from its calculation window. For the period in between, the two figures no go match, and both calculations still correct.

The trace below follow one monthly-paying bond fund, the iShares 20+ Year Treasury Bond ETF (TLT). Both lines na yields for the same fund on the same day. The first one annualize that month’s single payment. The second one add the previous twelve payments together.

WITH
    monthly_px AS
    (
        SELECT
            toStartOfMonth(date)           AS m,
            argMax(toFloat64(close), date) AS px
        FROM global_markets.stocks_daily_aggs
        WHERE ticker = 'TLT'
          AND date >= today() - 1600
        GROUP BY m
    ),
    monthly_cash AS
    (
        SELECT
            toStartOfMonth(exd) AS m,
            sum(cash)           AS cash
        FROM
        (
            SELECT
                any(ex_dividend_date)       AS exd,
                any(toFloat64(cash_amount)) AS cash
            FROM global_markets.stocks_dividends
            WHERE ticker = 'TLT'
              AND ex_dividend_date >= today() - 1600
              AND ex_dividend_date <= today()
            GROUP BY id
        )
        GROUP BY m
    ),
    joined AS
    (
        SELECT
            p.m    AS m,
            p.px   AS px,
            c.cash AS cash
        FROM monthly_px AS p
        INNER JOIN monthly_cash AS c ON c.m = p.m
    ),
    rolled AS
    (
        SELECT
            m,
            px,
            cash,
            sum(cash) OVER (ORDER BY m ASC ROWS BETWEEN 11 PRECEDING AND CURRENT ROW) AS ttm_cash,
            count()   OVER (ORDER BY m ASC ROWS BETWEEN 11 PRECEDING AND CURRENT ROW) AS months_counted
        FROM joined
    )
SELECT
    formatDateTime(m, '%Y-%m')        AS month,
    formatDateTime(m, '%b %Y')        AS month_label,
    round((100 * 12 * cash) / px, 2)  AS indicated_yield_pct,
    round((100 * ttm_cash) / px, 2)   AS ttm_yield_pct
FROM rolled
WHERE months_counted = 12
ORDER BY m ASC

For Apr 2023, the fund’s indicated yield stand at 3.03%, while its trailing twelve-month yield be 2.88%. By Aug 2026, the two figures read 4.8% and 5.13%. Anywhere wey the lines separate, one dey describe the current month and the other dey describe the past year. Figure wey dem label only as the fund’s yield fit mean either one.

Wetin rate move dey do to bond fund yield figures

Bond fund dey hold bonds wey e buy with the coupon rates wey dey available when e buy dem. As market yields dey move, the fund monthly payment only dey change when bonds wey mature get replacement with new ones. Among the three figures, SEC 30-day yield dey show this turnover first, because e dey measure accrued income for the most recent 30 days. Trailing twelve-month distribution yield dey show am last.

SELECT
    formatDateTime(toStartOfMonth(date), '%Y-%m') AS month,
    formatDateTime(toStartOfMonth(date), '%b %Y') AS month_label,
    round(avg(toFloat64(yield_3_month)), 2)       AS treasury_3m_pct,
    round(avg(toFloat64(yield_10_year)), 2)       AS treasury_10y_pct
FROM global_markets.treasury_yields
WHERE date >= today() - 1600
  AND date <= today()
  AND yield_3_month > 0
  AND yield_10_year > 0
GROUP BY toStartOfMonth(date)
ORDER BY toStartOfMonth(date) ASC

Between Mar 2022 and Aug 2026, three-month Treasury yield move from 0.54% to 3.9%, while ten-year move from 2.38% to 4.66%. Read this panel together with the previous one. The timing difference dey happen by design: market rates fit move that same day, fund monthly payment dey reprice over the months wey follow, and twelve-month total na the last among the three to settle. When you compare bond fund wey dem quote with SEC yield against another wey dem quote with trailing distribution yield during period like this, you dey compare two different points in time.

Where covered-call and return-of-capital funds fit

Na here distribution yield stop to be yield for any income matter. A covered-call ETF dey sell options against the holdings wey e get, then e pay out most of the premium, usually every month. Option premium no be interest or dividend income, so e no dey enter SEC 30-day yield at all. Covered-call fund wey hold large-cap equities fit show SEC 30-day yield wey near plain index fund own, while the advertised distribution yield fit run several times higher. None of the two figures wrong. Dem dey count different cash.

Some distributions na return of capital, where fund dey give back part of the principal wey you invest instead of paying income. Return of capital dey inside distribution yield, but e no dey inside SEC yield. E also lower your cost basis when e reach you. Later, this fit show as bigger taxable gain when you sell. Double-digit distribution yield wey get large return-of-capital component no be the same thing as double-digit SEC yield.

Another sign na payment stability. Indicated yield dey multiply one payment by the number of payments for one year, so the reliability depend on the payment wey e start with. The panel below use two years of regular distributions from the same funds. E measure how many payments land and how far the biggest one dey above the smallest one.

SELECT
    fund_ticker                                 AS fund,
    count()                                     AS payment_count,
    round(100 * ((max(cash) / min(cash)) - 1), 1) AS largest_vs_smallest_pct
FROM
(
    SELECT
        any(ticker)                 AS fund_ticker,
        any(toFloat64(cash_amount)) AS cash
    FROM global_markets.stocks_dividends
    WHERE ticker IN ('SPY', 'SCHD', 'VYM', 'QQQ', 'TLT', 'JEPI')
      AND ex_dividend_date > today() - 730
      AND ex_dividend_date <= today()
      AND toUInt16(frequency) > 0
    GROUP BY id
)
GROUP BY fund_ticker
HAVING count() >= 4
ORDER BY largest_vs_smallest_pct DESC, fund ASC

SCHD get the widest range among the 6 funds. Its biggest regular distribution dey 203.3% above the smallest one across 8 payments. VYM na the most steady, with spread of 16.4%. If you annualize one payment from the first fund, the headline fit change materially depending on the month wey that payment come from. If you do the same for the second fund, the answer barely change.

Which yield you go use, and when

• To compare two funds: use the SEC 30-day yield. Na the only one among the three wey follow one common definition, and na the only one wey don remove expenses already.
• To estimate the cash wey go enter your account: use the trailing twelve-month distribution yield, but treat am as starting point, no be forecast.
• To read an income fund headline number: check the footnote to see which distribution definition e use, and whether return of capital dey inside am.
• To build any table wey get more than one fund: choose one definition and apply am to every row. Table wey mix SEC yield with indicated yield go rank funds based on their footnotes.

Like-for-like fund comparison, like the one for SCHD vs VOO dividend yield, only make sense when both sides dey measured the same way. The wrapper matter too: SPY's dividend yield and its cash drag show how a fund legal structure fit change the payout itself.

FAQ

SEC 30-day yield na the same thing as distribution yield?

No. SEC 30-day yield dey measure income wey the fund holdings earn for the last 30 days after expenses. Dem standardize am so you fit compare any two funds. Distribution yield dey measure cash wey fund pay out. This one fit include option premium and return of capital.

Why distribution yield for fund dey higher than SEC yield?

Most times, one of two things dey happen. The distributions get something wey no be interest and dividend income, like option premium or return of capital. Or recent payment pass the fund current income. Option-income funds dey show the widest gaps.

Which yield go tell me how much cash I go receive?

Distribution yield dey closer to the answer because na payments wey the fund actually make dem use calculate am. Trailing twelve-month version dey describe year wey don already finish. No guarantee say the same distribution schedule go repeat.

Why two websites dey show different yields for the same ETF?

Most often, one site dey show trailing twelve-month distribution yield, while the other dey annualize the latest distribution. Another possibility be say one site dey quote SEC 30-day yield from the fund documents. All three fit correct at the same time for the same fund on the same day.

SEC 30-day yield include capital gains?

No. E dey count interest and dividend income wey accrue during the 30-day window, after expenses. Realized capital gains distributions and return of capital no dey inside am. Na one reason equity fund SEC yield fit look small beside its distribution yield.

Every panel here carry the exact SQL wey produce am. Open one to see how dem count each figure. If you wan pull distribution history for fund wey you dey follow, ask for am in plain English for the Strasmore terminal.