Yield is the total amount of income you earn
on an investment each year as a percentage of what you spent to
buy it.
A bond's yield is the interest the bond
pays divided by its price. If you buy a 10-year $1,000 bond paying
6% and hold it until it matures, you'll earn $60 a year for
ten years — an annual yield of 6%, or the same as the interest
rate.
A stock's yield is the dividend per
share divided by its current price per share. If a company whose
stock is selling for $40 a share pays an annual dividend of 80
cents a share, the stock's yield is 2%. However, while all
bonds have a yield, only those stocks that pay dividends have
yields.
