Yield is a measure of the fund's income distributions, as a percentage of the fund price. Morningstar calculates this figure by summing the income distributions over the trailing 12 months and dividing that by the sum of the last month's ending NAV plus any capital gains distributed over the 12-month period. Morningstar adds back capital gains to estimate what the fund's ending price would have been had it not distributed these gains; this makes the result more comparable to a stock yield because stocks do not distribute gains but rather simply increase in price.
Income distributions include interest from fixed-income securities, dividends from stocks, and realized gains from currency transactions.
Benefits
Morningstar offers both SEC yield (30 day) and 12-month yield figures.
Origin
Morningstar computes this figure in-house, using the trailing twelve month's income distributions, NAV, and capital gains.
For the Pros
The formula for yield is as follows:
Yield = Income/ (NAV + Capital Gains)
(or for closed-end funds only):
Yield = Income/(Market Price + Capital Gains)
Where
Income = the sum of the trailing 12-month income dividends
Capital Gains = the sum of the trailing 12-month capital gains
Note: When NMF appears, it indicates that the fund did not properly label its distributions.