Fact Checked by: David Chen, CFA | Financial Analyst & Investment Strategist
The Yield on Cost (YOC) is a critical metric for long-term dividend growth investors. This calculator helps you determine the dividend yield of an asset based on your original purchase price rather than its current market value, highlighting the growth of your investment over time.
Yield on Cost Calculator
Yield on Cost Calculator Formula
Yield on Cost (%) = (Annual Dividend / Original Purchase Price) × 100
Formula Source: Investopedia – Yield on Cost Definition | Morningstar Analysis
Variables:
- Annual Dividend: The total dividend payment expected from a single share over one year.
- Original Purchase Price: The initial price you paid to acquire the stock (cost basis), excluding current market fluctuations.
- Yield on Cost: The dividend yield percentage relative to your initial capital outlay.
Related Calculators:
What is Yield on Cost (YOC)?
Yield on Cost (YOC) is a measure of dividend yield calculated by dividing a stock’s current dividend by the price initially paid for that stock. For example, if an investor bought a stock five years ago for $20, and it now pays a dividend of $1.50 per share, the YOC for that investor is 7.5% ($1.50 / $20).
YOC is particularly popular among dividend growth investors. It allows them to see the “real” return on their original capital. Unlike the current yield, which fluctuates with the market price, YOC reflects the personal efficiency of the investment over the long term.
How to Calculate Yield on Cost (Example):
- Identify the Original Purchase Price (e.g., $50.00).
- Determine the Current Annual Dividend per share (e.g., $2.00).
- Divide the dividend by the purchase price ($2.00 / $50.00 = 0.04).
- Multiply by 100 to get the percentage (0.04 × 100 = 4.0%).
Frequently Asked Questions (FAQ):
Is Yield on Cost better than Current Yield? It serves a different purpose. Current Yield tells you what you get if you buy today; YOC tells you what you are earning on your historical investment.
Can YOC decrease? Yes, if the company cuts its dividend, your yield on cost will decrease even though your purchase price remains fixed.
Why is YOC used? It helps investors track the effectiveness of dividend growth strategies and justifies holding long-term winners.
Does YOC include reinvested dividends? Standard YOC calculations usually use the initial cost basis, but some investors adjust their cost basis if dividends were reinvested at different prices.