yield
Yield is the income an investment pays you each year, shown as a percentage of what it currently costs.
In plain English
Yield answers a very practical question. If I put money into this today, how much will it pay me each year for holding it?
A share costing ₦50 that pays a ₦5 dividend has a yield of 10 percent. A treasury bill priced so that you earn ₦19 on ₦100 lent has a yield of about 19 percent. A property bought for ₦40 million producing ₦4 million of rent yields 10 percent.
The reason it matters is comparison. Yield lets you place completely different things side by side and ask which one is actually paying you more for your money.
There is a trap in it, and it catches people constantly. Yield rises when the price falls. A share whose price collapses will show a beautiful yield the next morning, and that yield is a symptom rather than an opportunity. If a dividend yield looks unusually generous, the first question is not how much will I earn, it is what does the market know that I do not.
And always place any yield next to inflation. Nineteen percent sounds excellent until prices are rising by twenty five.
Two investments each cost ₦1 million. The first pays ₦80,000 a year, a yield of 8 percent. The second pays ₦150,000, a yield of 15 percent. Before choosing the second, ask why anyone is willing to pay you nearly twice as much for the same million naira.
Questions people ask
What is the difference between yield and return?
Yield is the income alone, paid while you hold. Total return also includes any change in the price. An investment can have a strong yield and still lose you money overall.
Why does yield rise when price falls?
Because the payment stays the same while the cost of buying it drops. The same ₦5 dividend on a share that fell from ₦50 to ₦25 doubles the yield without anything improving.
What is a good yield in Nigeria?
Compare it against inflation and against treasury bills, which are the safest naira return available. Anything promising far more than those deserves a hard look.
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