aftertax yield

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Aftertax Yield

An investment's rate of return after subtracting all applicable taxes, expressed as a percentage. Most analysts prefer to look at afterax yield instead of pretax yield when weighting investment decisions. Mutual funds are required to disclose their aftertax yields to provide the most accurate picture possible. See also: Current yield.

aftertax yield

The rate of return on an investment after taxes have been calculated and subtracted. Aftertax yield, as opposed to pretax yield, is generally a preferred basis for comparing investment alternatives.
Case Study Utilizing aftertax rather than pretax yield to evaluate investments is a universal rule that applies to stocks, bonds, real estate, and mutual funds. In 2001 the Securities and Exchange Commission adopted a rule requiring that mutual funds disclose in their prospectuses aftertax returns based on stipulated formulas. The SEC order also required certain funds to include standardized aftertax yields in advertisements and other sales materials. The order was prompted by the belief that many investors lack a clear understanding of the impact of taxes on their mutual fund investments. Mutual funds regularly tooted their horns regarding their pretax returns, but SEC studies indicated substantial differences existed in the extent to which these returns were taxed. The tax consequences of distributions are especially puzzling to many mutual fund shareholders who are taxed on distributions based on realized gains from which they frequently did not benefit. To provide investors with more accurate information, the SEC requires that mutual funds present aftertax returns in two ways: on fund distributions only, which would apply to investors who continued to hold their mutual fund shares, and on fund distributions and a redemption of fund shares, which would apply to investors who liquidated their mutual fund shares. In each case aftertax returns are presented as if the shareholder is in the highest applicable federal income tax rate. Pretax and aftertax returns are presented using a standard format.
References in periodicals archive ?
This must mean that the taxable income to the individual investor increases and the after-tax yield on corporate bonds realized by that investor will fall relative to the (untaxed) yield that he could have derived from his holdings of municipal bonds.
Proposition 1: If a positive probability of default exists, the insurer may optimally refrain from investing in tax-exempt bonds, even when the tax-exempt yield is greater than the after-tax yield from taxable bonds.
Last year, the combined, weighted, after-tax yield of this portfolio of municipals, government, and high-yield bonds would have been 6.
We look to the capital markets, especially the tax-exempt bond market, for a portfolio which might, after adjusting for all risk, produce higher after-tax yields and thus have a true tax advantage over a portfolio of Treasury securities.
To demonstrate, recall that the pre-tax yields shown in Exhibit 1, which are representative of yields prevailing when auction rate preferred stock was introduced (August 1984), implied an after-tax yield advantage of 205 basis points.
In light of that, investors should: (1) review their portfolios for long-term capital gains that are best realized before tax rates go up; (2) recalculate after-tax yields on corporate and municipal bonds and restructure their portfolios accordingly; (3) reconsider investment strategies, such as Master Limited Partnerships, that postpone the realization of ordinary income.
The interest on the AAA-rated insured bonds, because of its tax-exempt status, provides an after-tax yield of 7%.
The tax law change has made it more economic for us to reward our shareholders with a higher after-tax yield on Jefferies stock," added John C.
Moreover, because a portion of each payment constitutes return of capital, capital gain and ordinary income, D's effective after-tax yield increases significantly.
We believe their attractive after-tax yield and high credit quality makes Nuveen's MuniPreferred a nice complement to other short-term investments.
The Tax-Advantaged Ultra-Short Fixed Income Fund is designed to maximize after-tax return for investors in higher tax brackets by pursuing best net after-tax yield and total return opportunities in both taxable and tax-exempt securities.
The Company's investment portfolio generated an after-tax yield of 4.