What is YOC?
How Does YOC Work?
To calculate dividend by the per-share price you initially paid. You can use the trailing twelve-month dividend or estimate what the dividend be during the next twelve months.
Let's assume you bought XYZ for $10 per share. XYZ pays a $1 annual dividend, and since your purchase, the price of the stock has increased to $15 per share.
The current dividend yield of the stock is $1 / $15 = 6.7%. But the yield on cost (i.e., the on your ) is $1 / $10 = 10%.
Now assume that XYZ boosts its dividend to $1.50 per share. Your yield on cost has increased to $1.5 / $10 = 15%, and the current yield is now $1.5 / $15 = 10%.
If the number of you own doesn't change (either by a dividend reinvestment plan or by buying additional shares at another price), your yield on cost increase as the annual dividend per share increases.
Why Does YOC Matter?
yield on cost increase as the payout grows.
A to yield on cost is that it can get confusing to calculate the original cost of if you are constantly reinvesting dividends as part of a dividend reinvestment plan (DRP or DRIP).