Open any income fund's page and you can find three yields that disagree with each other: a 30-day SEC yield, a distribution yield, and a trailing 12-month yield. Investors routinely quote whichever one is biggest. Fund marketers do the same thing, with more intent. The three numbers answer three different questions, and knowing which is which changes how you read every income fund on the market, from SGOV to JEPI.
Three Yields, Three Different Questions
| Number | How it's calculated | The question it answers |
|---|---|---|
| 30-day SEC yield | Net investment income (interest + dividends, minus expenses) over the last 30 days, annualized under a standardized SEC formula | What are the holdings earning right now? |
| Distribution yield | Most recent payout, annualized (a monthly payment times 12), divided by share price | What cash did the fund just pay? |
| TTM yield | Sum of the last 12 months of payouts, divided by current price | What did the fund pay over the past year? |
SEC yield looks forward, distribution yield looks at last month, and TTM yield looks at last year. When yields are stable, all three converge and the distinction is trivia. When something is moving, they split, and the split itself tells you what is going on inside the fund.
SEC Yield Is the Only One With Rules
In 1988 the SEC got tired of funds advertising yields computed however flattered them most, and mandated one formula: every fund calculates net investment income the same way, subtracts the expense ratio, and annualizes over the same 30-day window. That standardization is the entire point. A 30-day SEC yield on one bond fund is directly comparable to the 30-day SEC yield on any other, net of fees, with no room for the issuer to choose a friendlier method.
It also carries a limitation in its definition: it only counts investment income, meaning interest and dividends. Cash a fund generates any other way, most importantly option premium, does not exist as far as the SEC formula is concerned. That single exclusion produces the biggest yield gaps on the market, covered below.
When Rates Move, TTM Yield Is Stale by Design
Take a Treasury bill fund like SGOV, which holds bills maturing in 0 to 3 months and charges 0.09%. Its SEC yield tracks whatever T-bills currently pay, so within about a month of a Fed rate change, the number reflects the new reality. Its TTM yield averages a full year of payouts, so after a rate cut it keeps quoting months of older, higher payments. The two numbers can sit half a point or more apart for most of a year, and the TTM figure is the misleading one: it describes bills the fund no longer holds.
The direction flips when rates rise: TTM lags below, SEC yield leads above. Either way the rule is the same. For cash and bond funds, the SEC yield is the number closest to what you will actually earn going forward, which is why every SGOV vs money market comparison worth reading quotes it instead of a trailing figure.
If a cash or bond fund's advertised yield looks unusually generous, find the 30-day SEC yield in the fund's own documents. When the flattering number is the TTM yield after rates fell, you have found the trick.
Covered Call Funds Show the Widest Gaps, and Neither Number Is Lying
JEPI is the canonical example. Its distribution yield has run around 8%, and that cash is real: it arrives monthly. But most of it comes from option premium generated by the fund's covered call strategy, and option premium is not "investment income" under the SEC formula. JEPI's SEC yield therefore reflects little beyond the dividends of its underlying stock portfolio and typically prints several points below the distribution figure.
Reading that gap correctly matters more than picking a side. The distribution yield describes the cash flow you receive. The SEC yield describes what the portfolio earns as income. The distance between them tells you how much of the payout depends on the option strategy continuing to produce, which is exactly the part that varies with market volatility. A covered call fund's payout is not a bond coupon, and the SEC yield line is where that difference becomes visible. The same reading applies to JEPQ, QYLD, and the rest of the covered call category, and it is separate from the tax problem covered in JEPI's 8% yield in a taxable account.
Which Number Fits Which Fund
| Fund type | Most useful number | Why |
|---|---|---|
| T-bill / bond funds (SGOV, BND) | 30-day SEC yield | Tracks current income, net of fees, updates within about a month of rate moves |
| Dividend stock funds (SCHD, VYM) | TTM yield | Quarterly payouts vary; a year of them smooths the noise. SCHD's has run around 3.5% |
| Covered call funds (JEPI, JEPQ) | Both, read together | Distribution yield = cash received. SEC yield = income earned. The gap = strategy dependence |
One more distortion worth knowing: distribution yield annualizes a single payment. A fund that just paid one unusually large distribution, a special payout or a strong option month, will quote a distribution yield it has no realistic chance of sustaining for a year. When a screener number looks too good, that multiplication by 12 is usually where it came from.
Reading Fund Yields
- 30-day SEC yield: standardized, net of fees, counts only interest and dividends. The only figure directly comparable across funds.
- Distribution yield: last payout annualized. Real cash, but one odd month distorts it.
- TTM yield: last year's payouts. Smooth but stale whenever rates or payouts are moving.
- For cash and bond funds, trust the SEC yield. TTM lags every Fed move by months.
- Covered call funds like JEPI show distribution yields several points above SEC yield because option premium is excluded from the SEC formula. The gap measures how much of the payout rides on the option strategy.
- Yields change constantly. Check the fund provider's page for current figures before comparing.
Common questions
The 30-day SEC yield is a standardized measure the SEC requires funds to calculate the same way: the fund's net investment income (interest and dividends, minus the expense ratio) over the last 30 days, annualized. Because the formula is uniform and net of fees, it is the one yield figure that is directly comparable across funds. It measures what the fund's holdings are earning right now, not what the fund recently paid out.
SEC yield measures what a fund's holdings earned in the last 30 days, net of expenses, under a standardized SEC formula. Distribution yield takes the fund's most recent payout, annualizes it (multiplies a monthly payment by 12), and divides by the share price. Distribution yield tells you the cash the fund has been paying; SEC yield tells you the income it is currently earning. For plain bond funds the two usually sit close together. For covered call funds they can differ by several percentage points.
JEPI's roughly 8% distribution yield comes mostly from option premium generated by its covered call strategy. The SEC yield formula only counts investment income, meaning interest and dividends, so option premium is excluded. JEPI's SEC yield reflects little more than the dividends on its underlying stock portfolio, which is why it typically prints several points below the distribution yield. Neither number is wrong; they answer different questions.
They measure different things, so it depends on the fund. For Treasury and bond funds, the 30-day SEC yield is the best forward-looking gauge because it tracks current income and updates within about a month of rate changes. For dividend stock funds, the trailing 12-month yield smooths out quarter-to-quarter variation. For covered call funds, distribution yield describes the cash you receive while SEC yield describes earned income, and you need both to understand the fund.
Not exactly. Dividend yield usually refers to trailing 12-month dividends divided by price. Distribution yield typically annualizes only the most recent payout, so one unusually large or small payment distorts it. A fund that just paid a special or elevated distribution can show a distribution yield far above what it will actually deliver over the next year.