12 Month Yield
The 12 month yield represents the distributions paid by a fund over the past year. It is
calculated by adding up any income distributions over the past 12 months, then dividing that by the sum of
the most recent NAV and any capital gains distributions made over that time.
Like the distribution yield, the 12 month yield indicates the income paid out by a fund. Because it
looks at the past year of payments, it is less affected by fluctuations in the monthly fund distribution.
The 12 month is helpful for understanding a fund’s income history, or what it has paid out in the
30 Day S.E.C. Yield
Based on the most recent 30 day period, this yield reflects the interest earned during
the period by the average investor in the fund, after deducting expenses for the period. This is a required
calculation developed by the S.E.C. in order to provide a standard comparison among bond funds.
Providers may calculate other yields differently, but every fund must follow the same formula for S.E.C.
The 30 Day S.E.C. yield is the only yield metric for which all funds providers must use the same
calculations. It is generally considered to be a consistent metric to use when comparing funds.
However, the 30 Day S.E.C. yield relies on short-term data, potentially making it difficult to draw a
longer term conclusion.
Aggregate Cash Flow Yield
The ACF yield is the discount rate that equates the ETF’s aggregate cash
flows (i.e., the sum of cash flows of the ETF’ bond holdings) to a given ETF price. The cash flow is based
on the yield-to-worst methodology in which a bond’s cash flows are assumed to occur at the call date or
maturity, whichever results in the lowest yield. This yield measure can be used to compare cash bonds
credit derivatives and ETF’s.
The methodology recognizes that, on any given day, the ETF represents a static portfolio of bonds.
Under the ACF methodology, the cash flow streams from the individual bond holdings are
aggregated into a single cash flow stream. The ACF method simplifies the calculation of yields and
spreads for bond ETF’s by treating then as a single investment, like a bond.
This is the annual yield an investor would receive if the most recent fund distribution
and current fund price stayed the same going forward. It is calculated by dividing the most recent fund
distribution by the most recent NAV and multiplying by 12.
Distribution yield measures a fund’s most recent distribution to investors, so it can be used as an
indicator of current income. The size of the distribution reflects the yield level that bonds traded
when they entered into the fund. Because of this, the distribution yield is slow to adjust to changes
in market yields.
This yield measurement represents the weighted average YTM of the bonds
in the find at a point in time, assuming that the bonds will be held to maturity and all coupons and final
principal payments will be made on schedule. It is the only yield measurement expressed as gross of fees
instead of net (such as the fund’s expense ratio), which means that fees should be deducted when
comparing to other yield measures.
YTM represents what the bonds in the fund are yielding at a current point in time. When bond yields
change in the market, the AYTM on a fund also changes, and future bonds acquired by a fund will
then be acquired at current YTM rates. In this way, YTM can be a good indicator of where the fund
distributions may be headed.