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How does Quicken 2006 Calculate "Yield on Investment"?

  
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Subject Author Date
How does Quicken 2006 Calculate "Yield on Investment"? Arnie Goetchius 08-01-2006
Posted by Arnie Goetchius on August 1, 2006, 3:51 pm
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 With Q2006, the "Yield on Investment" is almost identical to "Dividend
Yield" for one of my stocks which has gained substantially. For example:

The stock was purchased for $23,450 in December '05 with annual
dividends of $1300 for a "Dividend Yield" of 5.5% at the time of
purchase. Today the stock is worth $28,400 and with the same dividend,
the "Dividend Yield" is 4.6%. It appears that "Dividend Yield" uses
dividends/current market price x 100 to calculate 4.6%

I would have thought that the "Yield on Investment" would stay at 5.5%
based on the original investment cost. However, the "Yield on
Investment" shows 4.8%. I don't understand how Quicken makes that
calculation and why it doesn't come out as 5.5%. Does quicken adjust the
cost basis for some reason - inflation maybe?

Posted by John Pollard on August 1, 2006, 4:13 pm
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> With Q2006, the "Yield on Investment" is almost identical to
> "Dividend Yield" for one of my stocks which has gained
> substantially. For example:
>
> The stock was purchased for $23,450 in December '05 with
> annual dividends of $1300 for a "Dividend Yield" of 5.5% at
> the time of purchase. Today the stock is worth $28,400 and
> with the same dividend, the "Dividend Yield" is 4.6%. It
> appears that "Dividend Yield" uses dividends/current market
> price x 100 to calculate 4.6%
>
> I would have thought that the "Yield on Investment" would stay
> at 5.5% based on the original investment cost. However, the
> "Yield on Investment" shows 4.8%. I don't understand how
> Quicken makes that calculation and why it doesn't come out as
> 5.5%. Does quicken adjust the cost basis for some reason -
> inflation maybe?

For answers to questions such as the one posed in your subject,
I think the first place to look is in the "Glossary" on the menu
bar on the Portfolio tab.

One problem with your question, as stated, is that Quicken has
no such value as "Yield on Investment". There is "Yield on
investment (%)" or "Yield on investment (Estimated"; but no
"Yield on investment".

According to the Q2006 glossary:

"Yield on investment (%) equals: Income per share divided by
current market price per share."

and the definition of "Yield on investment (estimated)" is

"... the estimated income (specified by you in the Edit Security
dialog) divided by the dollar amount you invested (excluding
reinvestments)."

The definitions appear to be exactly the same in Q2005.

--
John Pollard
First initial underscore Last name at mchsi dot com
Please reply to newsgroup



Posted by Arnie Goetchius on August 2, 2006, 9:03 am
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John Pollard wrote:
>
>> With Q2006, the "Yield on Investment" is almost identical to
>> "Dividend Yield" for one of my stocks which has gained
>> substantially. For example:
>>
>> The stock was purchased for $23,450 in December '05 with
>> annual dividends of $1300 for a "Dividend Yield" of 5.5% at
>> the time of purchase. Today the stock is worth $28,400 and
>> with the same dividend, the "Dividend Yield" is 4.6%. It
>> appears that "Dividend Yield" uses dividends/current market
>> price x 100 to calculate 4.6%
>>
>> I would have thought that the "Yield on Investment" would stay
>> at 5.5% based on the original investment cost. However, the
>> "Yield on Investment" shows 4.8%. I don't understand how
>> Quicken makes that calculation and why it doesn't come out as
>> 5.5%. Does quicken adjust the cost basis for some reason -
>> inflation maybe?
>
> For answers to questions such as the one posed in your subject,
> I think the first place to look is in the "Glossary" on the menu
> bar on the Portfolio tab.
>
> One problem with your question, as stated, is that Quicken has
> no such value as "Yield on Investment". There is "Yield on
> investment (%)" or "Yield on investment (Estimated"; but no
> "Yield on investment".
>
> According to the Q2006 glossary:
>
> "Yield on investment (%) equals: Income per share divided by
> current market price per share."
>
> and the definition of "Yield on investment (estimated)" is
>
> "... the estimated income (specified by you in the Edit Security
> dialog) divided by the dollar amount you invested (excluding
> reinvestments)."

Sorry I wasn't more precise. "Yield on investment (estimated)" is the
one with which I'm having a problem. After going through the Edit
Security dialog and setting the estimated income, Quicken gives me a
figure of 2.94%. As stated above, the cost in December 05 was $23,450
and the yield is set to $1300 which gives a Yield on Investment
(estimated) of 5.54% by my calculation. This is a substantial difference
from the figure provided by Quicken.

>
> The definitions appear to be exactly the same in Q2005.
>

Posted by John Pollard on August 2, 2006, 10:40 am
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wrote-news.ops.worldnet.att.net...

> Sorry I wasn't more precise. "Yield on investment (estimated)"
> is the one with which I'm having a problem. After going
> through the Edit Security dialog and setting the estimated
> income, Quicken gives me a figure of 2.94%. As stated above,
> the cost in December 05 was $23,450 and the yield is set to
> $1300 which gives a Yield on Investment (estimated) of 5.54%
> by my calculation. This is a substantial difference from the
> figure provided by Quicken.

Could it be that it's because you have not owned the security
for a year. You did not say what the exact time period was that
you owned the security when Quicken computed 2.94% yield, but
that is a ball part number if the $1300 yearly estimate is
pro-rated to approximately 6+ months.



Posted by Arnie Goetchius on August 2, 2006, 10:49 am
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John Pollard wrote:
> wrote-news.ops.worldnet.att.net...
>
>> Sorry I wasn't more precise. "Yield on investment (estimated)"
>> is the one with which I'm having a problem. After going
>> through the Edit Security dialog and setting the estimated
>> income, Quicken gives me a figure of 2.94%. As stated above,
>> the cost in December 05 was $23,450 and the yield is set to
>> $1300 which gives a Yield on Investment (estimated) of 5.54%
>> by my calculation. This is a substantial difference from the
>> figure provided by Quicken.
>
> Could it be that it's because you have not owned the security
> for a year. You did not say what the exact time period was that
> you owned the security when Quicken computed 2.94% yield, but
> that is a ball part number if the $1300 yearly estimate is
> pro-rated to approximately 6+ months.
>
>

Could be. I bought it on 12/13/2005. Maybe that's the answer.

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