 # Things You Need to Know about the Multifinance Yield

When translated to Indonesian, multifinance yield means yields [redundant]. Literally, yield is a percentage which demonstrate the rate of return of an investment during a period of time. This percentage shows how much dividend and profit can be acquired through an investment.

Minimum yield multifinance is usually applied into investment instruments such as stocks and bonds. Contrary to the common understanding, yield is actually influenced by dividends and the interest rate. High yield in general signifies that the investment is profitable and not risky, vice versa. However, it is not the only factor and the accuracy is not 100%.

The purpose of yield

As explained before, yield is very useful for investors in determining where they would invest their money. Many people believe that high yield signifies a better opportunity to generate profit.

Other than aiding investors in making their investment decision, yield can also be used as a benchmark or reference to understand a company’s financial situation further. You need to know, increasing yield can be caused by a bigger dividend payment or a decrease in the investment price.

A bigger dividend payment in general can be an indicator that the company have a high revenue. However, this will cause the investment price to increase and therefore the yield will be in a consistent level without a significant increase. If a dividend increase happens without a leap in the investment prize, this can be a sign that there is an abnormality in the company’s cashflow.

Through information gained by the yield, you can determine which company is healthy and which one is unhealthy financially. Therefore, it is useful to learn how to calculate a yield.

How to calculate yield

Yield can be calculated easily, formula used for this purpose is not as complex as you might have imagined. As long as you know the dividend, interest rate, and initial price of an investment, you can calculate it yourself. Following is the formula:

Yield = Realized return Principal amount

First, calculate the increase of the price per share and the dividend paid per share. Then, the sum is divided by the initial price of the investment.

For example, you bought a stock priced Rp10,000 per share. Then, a dividend of Rp2,000 per share was paid. Now, the price of the stock increased to Rp12,000 per share. Then, to calculate the yield of the stock is as follow:

Yield = {2,000 + (12,000-10,000)} 10,000

Yield = 0.4 = 4%

Isn’t it easy? The result from the calculation showed that the stock yields 4% which is still categorized as a minimum yield multifinance. Yield itself can be used in stock and bond investments. Other than this formula, there are several types of yield used by multifinance companies.

Types of yield

In stock investment, there are two types of yield used: yield on cost (YOC) and current yield. YOC calculates the difference between per share dividend which is paid now and the one at the beginning of the investment. This is also the type of yield discussed before. Meanwhile, current yield calculates the difference between the dividend and the current investment price, not the price at the beginning.

For yield in the bond investment, usually use the type of yield which calculates the difference between yearly interest rate and the nominal value of the bond. Other than that, there is also yield to maturity and yield to worst. Yield to maturity calculates total of the amount expected if the bond is to be held until the maturity. Meanwhile, yield to worst calculates the lowest yield expected from the bond.

A good minimum yield

After knowing what is yield, a new question emerges, how much is a good minimum yield multifinance? In fact, there is no sure answer, remembering that yield itself changes. However, as a benchmark, minimum yield multifinance is around 4-6%. Yield with a lower rate can’t be considered profitable for many investors.

For multifinance companies, smoothness of a business operational influences the yield of its stock. Surely, companies with higher yield than the minimum yield multifinance will have a greater potential to receive more funds from the investors. Therefore, you need an integrated system unique to multifinance companies, CONFINS. This core system offers various features and sophisticated modules which are high performing.