How Is Yield on Cost Calculated?
When you calculate yield on cost (YOC), you’re measuring a stock’s dividend yield based on the price you originally paid for it.
|Purchase Price Per Share:|
|Current Price (optional):|
|Annual Dividend ($):|
To calculate yield on cost, enter:
- your per-share purchase price
- the annual dividend.
- dividend of the trailing twelve months or an estimate of the next twelve months’ dividend.
Example of Yield on Cost Calculation
For example, you buy shares of Company XYZ for $10 and XYZ pays a $0.10 dividend per share for each of the last 12 months.
You would enter:
- “10” as the purchase price
- “1.20” as the annual dividend amount (0.10 x 12 = 1.20).
- If the dividend is predicted to increase to $0.20 per month for the next 12 months, you would enter “2.40” as the dividend amount.
Your yield on cost would be 12.00%.
Note: If you’d like to compare yield on cost to the current yield, enter the current price as well (this is optional).
What Yield on Cost Is Important
Yield on cost is highly relevant to individual investors, but it’s often overlooked in favor of current dividend yield. A company that is able to consistently grow its dividends could be a great investment for individual investors who want to see their yield on cost increase as their dividend payout grows.