VG Bond Fund Yield

[Packman]

I own Vanguard's Intermediate Muni Bond fund (VWIUX, or in non-admiral form, VWITX). On VG's web site, it shows a 30 day yield of 1.58%. The actual monthly dividend I receive is over 3% (annualized). I know there is always a small difference between stated yield and actual because of bonds coming into and going out of the portfolio (though the turnover in this fund is only 11%). But the actual difference is almost double??

I called Vanguard and talked to three individuals - none of which could tell me specifically why there was this large of a difference. One had no idea, the other two fumbled through explanations that were not accurate or sensable. That is a shame on Vanguard, but I'm still trying to figure this out. If I invested in a bond fund that had a 3% 30 day yield, and it paid me 1.5%, I would be upset. Any ideas?

 

[FIREd]

Here is a pretty good explanation regarding the difference between the 30-day SEC yield advertised on VG's website and the distribution yield:

What is a Distribution Yield? What is an SEC Yield?

The distribution yield is a backward-looking figure that simply takes the fund's current monthly income dividend per share, annualizes it (by dividing by the number of days in the month and multiplying by 365) and shows the yield as a percentage of the fund's average net asset value (NAV) during the month. [...] The SEC yield figure approximates the yield an investor would receive in a year assuming that each bond in the portfolio is held until maturity. This measure also assumes reinvestment of all income, and it accounts for fees and expenses.

 

[pb4uski]

This is what the prospectus says:

.....For other funds, 30-day SEC yield is derived using a formula specified by the commission. Under the formula, data related to the fund’s security holdings in the previous 30 days are used to calculate the fund’s hypothetical net income for that period, which is then annualized and divided by the fund’s estimated average net assets over the calculation period. For the purposes of this calculation, a security’s income is based on its current market yield to maturity (in the case of bonds) or its projected dividend yield (for stocks). Because the SEC yield represents hypothetical annualized income, it will differ—at times significantly—from the fund’s actual experience. As a result, the fund’s income distributions may be higher or lower than implied by the SEC yield.

Also see What is a Distribution Yield? What is an SEC Yield?

 

[Packman]

Thanks for providing this link - it was helpful. So, the fast answer is the 30 SEC yield is a comparison tool for looking at different bond funds, and the distribuiton yield is the "actual" yield paid. The other frustrating part about this is that you need to go to the acutal bond fund web site to find both yields. Fidelity's web site only shows the 30 day yield.