Difference between "Annualized Dividend" and "SEC Standardized"?

hank

RE: TRBUX

What is the difference between "Annualized Dividend" and "SEC Standardized"?
Which of the two is a better predictor of what an investor might expect to earn going forward?

(Excerpted from T Rowe Price's website on 11/27/16):

"Benchmark Definitions
30-Day Yield
Annualized Dividend as of 11/25/2016 1.32%
SEC Standardized w/ Waiver as of 10/31/2016 1.21%
SEC Standardized w/o Waiver as of 10/31/2016 1.06%"

(I think the 3rd line re waiver is pretty easy to understand.)

msf

It helps to read the footnotes. These figures all come under the heading "30-Day Yield"; on the page in question, that heading has a footnote #2

The 30-day dividend yield represents the average daily dividends for the 30-day period, annualized and divided by the net asset values per share at the end of the period; it is available the first quarter after the fund's inception. The SEC standardized yield is computed under an SEC standardized formula and reflects an estimated yield to maturity (assuming all portfolio securities are held to maturity); it is available the first month after the fund's inception.

While the footnote used slightly different names (creative writing, I guess), what it is calling "dividend yield" is the "annualized dividend", and of course what it is calling the "SEC standardized yield" is the "SEC standardized yield."

Both are computed based on the past 30 days (hence the 30-Day Yield heading). As the footnote says, the annualized yield is just the past monthly yield annualized. So if the fund paid out 0.1% in dividends in the past month, the annualized yield would be roughly [(1+ .001) ^ 12] - 1, or about 1.2%.

The SEC yield is a formula that tries to approximate yield to worst for a portfolio of bonds rather than for a single bond. If you buy a bond at $101 that matures in a year, with a coupon of 2%, your yield to worst (assuming there's no call option) is going to be about 1%. That's because you get 2% in interest (coupon) but lose 1% in value. Now, throw lots of bonds like that into a portfolio, and you see why the SEC came up with a slightly more complex formula. But the idea's the same.

The SEC yield (which I prefer) represents what you might expect for total return, assuming interest rates don't change, that you're able to reinvest at the same rate, etc. The annualized dividend ignores the premium or discount of the bonds in the portfolio, and just tells you the current dividend yield (in percent per year, i.e. annualized).

The portfolio might hold lots of high coupon bonds (so you'd get a high dividend payout), but over time the price of that portfolio is going to decline, reducing your total return. Or it might hold zero coupon bonds, where the annual dividend is zero (seems pretty obvious), and your return comes from the appreciation of that portfolio.

It depends on what your focus is - cash flow or return. Mine is on return.