Calculating Divd yield for a large portfolio ?

Which of the following would be a more accurate method : Taking the average of divd. yields ( each holding ) to come up with a dividend yield for the portfolio OR Total divd. recieved ( YTD ) as per financial statements , divided by the curent market value Is there is an industy standard ?


Why B ?

actually neither is accurate unless all the names in the portfolio are equal weighted

If you’re going to calculate yields first, then average them, you need to weight your average by market value of the position. I don’t particularly like your second option, because in light of all the dividend cuts lately, it doesn’t tell you what to expect for the upcoming year/quarter/period. I’d vote for: total expected divs in next year ------------------------------------------- total MV of holdings

In the first case it is the Account’s total market value weighted dividend return . I’m tyring show a 2007 vs 2008 divd yield comparison , therfore I’m not too concerned about expected divds at this point .

The div yield of a portfolio would be total dividends divided by total market cap. You could also get it by doing a weighted average of component dividend yields, where each component is weighted according to it’s presence in the portfolio. This assumes that each component’s dividend yield is calculated the same way (same relevant dates, estimation or hisorical techniques, etc.).

There is a big difference between the 2 methods . Divd/Mkt value gives me about 1.03% and the weighted averge divd. yield method gives me 4.08 ( without outliers ) .

This is why you should let some back office schmo handle this busywork and deal with more important issues.

Hmm… I’ll have to think about that. If in doubt then, sum up dividends and divide by the total value of the portfolio. A few possibilities: is there cash in the portfolio, and are you including the weight of cash with a dividend of zero? are there fixed income instruments in the portfolio? are the dividend yields of the component instruments computed with different start and end or market cap dates? Does the portfolio have short positions where you pay out dividends instead of receive them?

Bchad - That is exactly what I did , total divds recieved for the year divided by the market value of equity as of Dec 08 . I am calculating Divd. yield , Income yield and Total Yield . Divd yield is calculated as indicated above , Income Yield = ( Interest income from cash and bonds) / Fixed income market value as of Dec 08 . No short positions .