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Dividend Yield On Cost Formula:
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Dividend Yield On Cost is a financial metric that measures the annual dividend income as a percentage of the original investment cost. It helps investors evaluate the income return on their initial investment over time.
The calculator uses the Yield On Cost formula:
Where:
Explanation: This calculation shows what percentage of your original investment is returned to you each year in dividend income.
Details: Yield On Cost is particularly valuable for long-term investors as it demonstrates how dividend growth over time can significantly increase the effective yield on an initial investment, especially when companies regularly increase their dividend payments.
Tips: Enter the total annual dividend amount in dollars and the original cost basis of your investment. Both values must be positive numbers, with cost basis greater than zero.
Q1: How is Yield On Cost different from current dividend yield?
A: Current yield is based on the current stock price, while Yield On Cost is based on your original purchase price, showing how your effective yield has changed over time.
Q2: What is a good Yield On Cost?
A: This varies by investment strategy, but generally, a higher Yield On Cost indicates a more successful long-term dividend investment. Many investors aim for yields above 5-10% on cost after several years.
Q3: Does Yield On Cost account for dividend reinvestment?
A: The basic calculation doesn't account for DRIP (Dividend Reinvestment Plan). For accurate results with DRIP, you would need to adjust the cost basis to include reinvested dividends.
Q4: How often should I calculate my Yield On Cost?
A: Many investors calculate it annually when reviewing their portfolio performance, especially after companies announce dividend increases.
Q5: Can Yield On Cost decrease over time?
A: Yes, if a company cuts its dividend, your Yield On Cost will decrease even if your original investment remains the same.