Dividend Yield on Cost Calculator
Calculate your personal yield based on original purchase price and see how dividend growth has rewarded long-term holders.
Calculate Yield on Cost
Table of Contents
How to Use This Calculator
- Enter the current annual dividend — The total annual dividend per share the company pays today.
- Enter your original purchase price — The price you actually paid per share, not today's market price.
- Enter the current market price — Used to compare your YoC to what new buyers get.
- Review results — See how your personal yield compares to the current market yield.
Yield on Cost Formula
YoC = (Current Annual Dividend / Original Purchase Price) × 100
Example: You bought shares at $50 and the current annual dividend is $4.00:
- YoC = ($4.00 / $50.00) × 100 = 8.00%
- Current market yield at $120 = ($4.00 / $120) × 100 = 3.33%
- Your YoC is 2.4× the market yield because you bought at a lower price
Understanding Yield on Cost
Yield on cost measures the dividend return based on your original investment price, not the current market price. It reveals the true income return earned by patient, long-term dividend investors. When a company raises its dividend year after year while the stock price also climbs, early buyers enjoy a personal yield that far exceeds what new investors can achieve.
Why Long-Term Holders Benefit
Consider Coca-Cola investors who bought shares in the early 2000s at $40-50. With the current annual dividend around $1.94, new buyers get roughly a 3% yield. But someone who bought at $20 in the 1990s has a yield on cost above 9%. This illustrates why dividend growth investing rewards patience — your income stream grows even as you hold the same shares.
Frequently Asked Questions
What is yield on cost?
Yield on cost (YoC) is the annual dividend divided by the price you originally paid for the stock, expressed as a percentage. It reflects your personal dividend return based on your actual investment, rather than what the market currently offers.
Why does yield on cost matter?
YoC shows the real income return on your original investment. It demonstrates the power of holding dividend growth stocks long-term. A stock yielding 2.5% today could produce a 10%+ YoC for investors who bought years ago and benefited from consistent dividend increases.
How does YoC change over time?
Your YoC increases every time the company raises its dividend, since the denominator (your purchase price) stays fixed. For Dividend Aristocrats that raise their dividend annually, YoC can grow significantly over 10-20+ years.
What is a good yield on cost?
It depends on your time horizon. After 10-15 years of holding a quality dividend grower, a YoC of 6-10% is achievable. After 20+ years, some investors see YoC above 15%. The key is consistent dividend growth from the underlying company.
Is yield on cost a useful metric?
YoC is useful for measuring how well your original investment is performing as an income generator. However, it should not be the sole basis for holding a stock. If a better opportunity exists, the current yield and total return potential matter more than your historical cost basis.
How does DRIP affect yield on cost?
Dividend reinvestment changes your effective cost basis. If you reinvest at higher prices, your average cost rises and true YoC is lower than the simple calculation suggests. Conversely, reinvesting during dips lowers your average cost and boosts YoC.
Sources
- Investopedia - Yield on Cost
Definition and calculation of yield on cost for investors.
- Motley Fool - Understanding Yield on Cost
Practical guide to using yield on cost in dividend investing.
- Schwab - Dividend Investing Strategies
Overview of dividend growth metrics including yield on cost.