The yield is the income return on an asset. For example, if you buy a stock for £1 and it pays a dividend of 4p, its yield will be 4% (4p divided by 100p). Similarly, if you buy a bond for £100 and it pays a coupon of £3 then its yield will be 3% (£3 divided by £100).
One important aspect of yield is that it is inversely correlated to the price of the asset. If we take the above stock example and assume that the stock price goes up to 110p but still pays 4p in dividends, then the yield will be lower (3.63%). This doesn’t mean however that the income has changed – you are still receiving 4p for each share you own.
We have built an infographic to illustrate the inverse relationship between price and yield which you can find here. Please feel free to play around with it.