Distribution Yield

What Is a Distribution Yield?

Distribution yield measures the cash a fund or other pooled investment has paid to its holders over the past twelve months, shown as a percentage of its current share price. It is most often quoted for exchange-traded funds, real estate investment trusts (REITs), master limited partnerships and similar vehicles that are built to pass most of their earnings on to shareholders. The term is related to, but distinct from, dividend yield, which is usually used for individual stocks.

How It Is Calculated

Distribution yield is found by adding up the distributions paid per share over the trailing twelve months and dividing that total by the current share price:

Distribution Yield = Trailing Twelve-Month Distributions per Share ÷ Current Share Price

For example, suppose a hypothetical fund trades at $50 per share and paid $2.00 per share in distributions over the past year. Its distribution yield would be 4 percent. Because the share price changes daily, the yield moves with it. If the price rose to $60 while the payouts stayed the same, the yield would fall to about 3.3 percent. Some funds also publish a yield based on net asset value rather than market price, so it helps to check which basis a figure uses.

What the Number Can and Cannot Tell You

A distribution is not the same as profit. Payouts can include ordinary income, capital gains, and return of capital, which is money handed back from the original investment rather than earned. A high distribution yield can therefore reflect a falling share price, or payouts that are not supported by the fund's underlying earnings, rather than strong performance. For this reason, many investors also look at total return, which combines price changes with distributions, when judging an investment.

Why It Matters to Investors

Distribution yield is useful for comparing the income level of similar funds and for tracking how much cash flow an investment has produced over time. Reviewing whether distributions have been steady, and what they consist of, gives more context than the headline percentage alone. Because the figure is a snapshot based on past payouts and a moving price, it describes history rather than guaranteeing future income.