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Capital Gains Yield

The price appreciation component of a security's (such as a common stock) total return. For stock holdings, the capital gains yield will be the change in price divided by the original (purchase) price.

Calculated as:

capitalgainsyield

Where:
P0 = Original price of the security
P1 = Current/Selling price of the security

 

For example, suppose Peter purchased a share of XYZ for $100 and he later sells the share for $110. The capital gains yield for that investment would be 10%.

It is important to analyze both the capital gains yield and the total return yield of an investment holding. Dividends are not to be counted in a capital gains yield assessment, but keep in mind that depending on the stock, dividends could comprise a substantial portion of the total return of the stock compared to capital gains.

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