Question 1

What is yield on cost (YOC)?

Accepted Answer

Yield on cost is your annual dividend income divided by what you originally paid for the stock (your cost basis). If you bought a stock at $50 that now pays $3/year in dividends, your YOC is 6% — even if the stock now trades at $100 (making the current yield only 3%).

Question 2

Why does yield on cost matter?

Accepted Answer

YOC shows the true income return on your original investment. Long-term holders of dividend growth stocks often have YOCs of 8-15% or higher, far exceeding what any new buyer can get. It's a powerful metric that rewards patience and validates the buy-and-hold approach.

Question 3

How fast does YOC grow?

Accepted Answer

YOC grows at the same rate as the company's dividend growth. If a company raises its dividend by 7% per year, your YOC doubles roughly every 10 years (Rule of 72). A 3% starting yield becomes 6% YOC in 10 years and 12% YOC in 20 years.

Question 4

Is yield on cost better than current yield?

Accepted Answer

They measure different things. Current yield is useful for comparing stocks today. YOC measures how well your past investments are performing. Both matter: use current yield to decide what to buy, and YOC to evaluate whether to hold.

Question 5

Does DRIP affect yield on cost?

Accepted Answer

DRIP changes your average cost basis because reinvested dividends buy shares at the current market price. If the stock price has risen since your original purchase, DRIP raises your average cost basis, which can lower your YOC. However, you own more shares, so your total income is higher.

Yield on Cost Calculator

Stock Details

Yield on Cost vs Current Yield

Frequently Asked Questions

Related Tools

Dividend Income Calculator

DRIP Calculator

Dividend Aristocrats & Kings