 # YOC

## What it is:

YOC stands for yield on cost, which is an investment's annual dividend divided by the original purchase price of the investment.

## How it works (Example):

To calculate yield on cost, divide the annual dividend by the per-share price you initially paid. You can use the trailing twelve-month dividend or estimate what the dividend will be during the next twelve months.

Let's assume you bought Stock 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 yield on your investment) 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 shares you own doesn't change (either by a dividend reinvestment plan or by buying additional shares at another price), your yield on cost will increase as the annual dividend per share increases.

## Why it Matters:

Yield on cost is highly relevant to individual investors, but it is often overlooked in favor of 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.

A downside to yield on cost is that it can get confusing to calculate the original cost of shares if you are constantly reinvesting dividends as part of a dividend reinvestment plan (DRP or DRIP).