Distribution yield is a measure of the current return of a given financial instrument such as an exchange-traded fund (ETF) or a real estate investment trust (REIT). It is calculated as a percentage of the instrument's purchase or net asset value (NAV). The calculation is based on both regular dividends or distributions and special interest payments, if applicable.

Distribution yield is important to potential investors because it is one of the most straightforward ways to judge the current return of a financial instrument. It can, however, be skewed by special dividend payments or other one-time distributions, so investors should be aware of this when calculating the yield themselves.

The primary benefit of distribution yield over other methods of calculating a financial instrument's return (such as price appreciation) is that it takes into account more factors than simply the movement of the price. Because the calculation is based on actual cash distributions, it reflects the returns from the instrument regardless of its share price.

By factoring in the total dividends or distributions and any other one-time payments, investors can get an accurate picture of the current return of the financial instrument. This can be especially helpful in the case of REITs and other investments that generate periodic dividends or distributions, but also make additional one-time payments.

When analyzing financial instruments, distribution yield should always be considered in combination with other metrics such as price appreciation to get a complete picture of an instrument’s returns. Investors must also take into account their unique financial goals when evaluating yield so that they can choose the best investments for their portfolio.