TTM: Trailing Twelve Months Yield
Have you ever done research on a mutual fund and discovered its TTM Yield? When an investor wants to know the yield of a particular investment security, such as a stock, bond, mutual fund or ETF, they may find the trailing twelve-month yield, aka TTM Yield. But what does this mean and how does the information help investors?
Here's your opportunity to learn the definition of TTM Yield and how to use it.
TTM Yield Definition and Calculation
A trailing twelve month yield (TTM Yield) refers to the percentage of income the fund portfolio returned to investors over the past 12 months. The TTM is an acronym referring to "trailing twelve months." It is calculated by taking the weighted average of the yields of the holdings (i.e. stocks, bonds or other mutual funds) that are in the mutual fund or ETF portfolio.
By comparison, the yield for a particular fund's underlying stock holdings is calculated by dividing the total dollar amount of dividends the stock paid out as income to shareholders by the stock's share price.
How to Analyze a Mutual Fund's TTM Yield
The TTM Yield provides the recent history of a mutual fund's average dividend and interest payouts to investors. For example, if you are analyzing a fund and you see that it's TTM Yield is 3.00%, it would have paid out $3,000 to an investor that has $100,000 invested in the mutual fund during the previous year. However, it is important to note that the TTM Yield should be considered an estimate because it may not represent the actual income received by a particular investor.
Also, as with past fund performance, the income paid out by a mutual fund in the past year is no guarantee that it will yield the same amount over the next 12 months. Therefore, in many cases, a better way to estimate the future yield on a mutual fund, compared to looking at the TTM Yield, is the SEC Yield. This yield is more current and can help provide more information and a clearer picture about what yield to expect in the near future.
Outlook on Yields for Bond Funds
In recent history, interest on bond funds and dividends paid out by stock funds has been relatively low. Therefore it is possible that the long-term trend would be for interest rates and corresponding yields on bonds could rise off historic lows. Yields did rise in 2018 but began to level off and fall slightly in 2019.
Generally the yields on stock mutual funds refers to dividend payments. For bond funds, the yield comes from interest payments. Investors that are interested in mutual fund yields are generally those that are looking for income from investments. If you want to see an example of funds that pay dividends, be sure to check out our article on the basics of dividend mutual funds or you might try reviewing a list of the best Vanguard funds that pay dividends.
Disclaimer: The information on this site is provided for discussion purposes only, and should not be misconstrued as investment advice. Under no circumstances does this information represent a recommendation to buy or sell securities.