SEC Yield

What it is

The SEC 30‑day yield is a standardized measure, required by the U.S. Securities and Exchange Commission, that annualizes a fund’s recent income return. It reflects interest and dividends earned over a recent 30‑day period, after subtracting fund expenses, and is expressed as an annualized percentage. This makes it a useful, comparable benchmark for bond mutual funds and bond ETFs.

How it works

• Calculated monthly (most funds) using the most recent 30‑day period; U.S. money market funds report a seven‑day SEC yield.
• Shows the effective interest rate an investor would earn over the next 12 months if the fund’s income and expenses remained unchanged.
• Required disclosure: funds must report the SEC yield, which improves comparability across funds.
• It differs from distribution yield: SEC yield is based on recent earned income less expenses and is annualized; distribution yield is based on actual distributions paid and can include return of capital or realized gains.

Formula and variables

The annualized 30‑day SEC yield uses four variables:

• a = total interest and dividends received in the last 30 days
• b = accrued expenses over the last 30 days (excluding reimbursements)
• c = average daily number of shares entitled to distributions during the period
• d = maximum share price on the last day of the period

Formula:
SEC 30‑day yield = 2 × [(((a − b) / (c × d) + 1)^6) − 1]

(The formula annualizes the 30‑day return by compounding six times and doubling to produce a 12‑month equivalent.)

Example

Assume a fund reports:
– Dividends = $12,500; interest = $3,000 → a = $15,500
– Expenses = $6,000 with $2,000 reimbursed → b = $6,000 − $2,000 = $4,000
– Average daily shares entitled to distributions = c = 150,000
– Maximum share price on last day = d = $75

Step-by-step:
1. (a − b) = $15,500 − $4,000 = $11,500
2. c × d = 150,000 × $75 = $11,250,000
3. (a − b) / (c × d) = 11,500 / 11,250,000 ≈ 0.00102222
4. Add 1: 1.00102222; raise to the 6th power ≈ 1.006148
5. Subtract 1: 0.006148; multiply by 2 → 0.012296 ≈ 1.23%

So the fund’s SEC 30‑day yield ≈ 1.23%.

How to use and interpret it

• Use SEC yield to compare the income potential of bond funds and ETFs in a standardized way.
• It indicates income yield only; it does not forecast total return. Price changes, credit events, and changing interest rates will affect actual future returns.
• Because it is based on a recent 30‑day period, it can change month to month as income and expenses vary.

Limitations and caveats

• SEC yield excludes realized or unrealized capital gains/losses and does not reflect potential principal appreciation or depreciation.
• It reflects past earnings over a short window and assumes those earnings and expense levels will persist.
• Expense reimbursements are excluded from the expense variable (b), per the SEC definition.
• Money market funds use a seven‑day SEC yield, which is calculated differently and then annualized.

Key takeaways

• The SEC 30‑day yield is a standardized, SEC‑mandated way to annualize a fund’s recent income after expenses, making bond fund comparisons easier.
• It’s useful for evaluating income potential, but it is not a guarantee of future returns and does not account for price changes or capital gains.