Trailing Twelve Months Yield - TTM
What is a Mutual Fund's TTM Yield and What Does it Mean to Investors?
Have you ever done research on a mutual fund and discovered its TTM Yield? What does it 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 mutual fund's 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 the stock's share price.
How to Analyze a Mutual Fund's TTM Yield
The TTM Yield provides 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.
In recent history, interest on bond funds and dividends paid out by stock funds has been relatively low. Therefore it is possible that the next twelve months' yield for an income oriented mutual fund could potentially have a higher yield than previous twelve months' yield. This is because yields have shown a trend of rising to higher levels off of their lows.
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.