Tempted by an attractive yield on a bond fund? Better be sure you know which yield you’re looking for.
Some fund sellers quote a type of figure for a fund’s income return that can be a full percentage point or more higher than the standardized yield calculations mandated by the Securities and Exchange Commission.
Consider, for instance, T Rowe Price Tx Fr Inc Tr Intmed Bond (PTIBX). The fund’s recent SEC yield, as listed on the fund firm’s Web site, is 2.39%. But the “annualized dividend” yield listed just above that figure is a more substantial 3.79%.
Similarly, the “distribution rate” for MFS Bond Fund/A (MFBFX) is over 5% while the SEC yield is 3.97%, according to the MFS Web site. Many stockbrokers and other fund sellers focus on the figure they call the dividend yield or the distribution rate rather than the SEC yield, says Jim Swanson, a portfolio manager and fixed-income strategist at MFS Investment Management in Boston.