what is a tax yield payout

A tax yield payout is not a commonly used financial term. However, there is a term called "tax-equivalent yield" which is used to compare the returns of a tax-exempt bond to a fully taxable bond. Tax-equivalent yield is the return that a taxable bond would need to equal the yield on a comparable tax-exempt municipal bond. It is a tool that investors can use to compare the returns between a tax-free investment and a taxable alternative. The calculation of tax-equivalent yield is determined by taking the yield of a tax-exempt bond and dividing it by one minus an investors federal income tax bracket. The resulting number will differ from person to person since each individual can have different federal, state, and local tax rates. Tax-equivalent yield gives investors a framework to evaluate two bonds with different tax treatments side by side. However, it shouldnt be the only factor in an investment decision, as it cannot account for the level of risk associated with a security.