How The Yield on Cost Calculation Works
When you calculate yield on cost, 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 and the annual dividend. You can use either the trailing twelve months’ dividend or an estimate of the next twelve months’ dividend.
Example of Yield on Cost Calculation
For example, if you buy shares of Company XYZ for $10, and XYZ paid a $0.10 dividend per share each month during the last 12 months, enter “10” as the purchase price and “1.20” as the annual dividend amount (0.10 x 12 = 1.20). Or, if the dividend is forecast to increase to $0.20 per month for the next 12 months, enter “2.40” as the dividend amount to calculate the projected yield on cost.
If you’d like to compare yield on cost to the current yield, enter the current price as well (optional).
What Yield on Cost Means for Investors
If you bought shares of stock at $10.00 per share and expect to receive $1.20 per year in dividends, your yield on cost is 12.00%. Yield on cost is highly relevant to individual investors, but it is often overlooked in favor of the current dividend yield. A company that is able to consistently grow dividends can be a great investment for individual investors who see their yield on cost increase as the dividend payout grows.