How it works
A yield-on-cost tracker measures the annual dividend a position pays you divided by what you originally paid for it — not its current market price. A share bought at $42 that paid $1.40 started with a 3.3% yield; if the payout compounds at 7% annually, eight years later that same basis throws off roughly $2.41, an 5.7% yield on cost even though a fresh buyer at today's price sees a much smaller figure. The distinction matters because yield-on-cost is backward-looking flattery: it celebrates your basis, not the opportunity set. The calculator projects the whole path year by year, shows the multiple your income has grown versus the day you bought, and previews where five more years of raises would land. Use it as motivation for holding patient compounders and as a sanity check against selling too early — but pair it with current-yield comparisons before adding new money, because a high YOC can hide a business that stopped growing or a sector paying newcomers far more than your legacy basis earns.
Formula
YOC = annual dividend per share ÷ cost per share × 100 | dividend grows each year: D×(1+g)^t
Tips
- Yield on cost rewards your patience, but new money buys at market yield — compare both before reinvesting.
- A 7% grower doubles the payout about every decade without you doing anything.
- If the current market yield is far below your YOC, the market may doubt future raises.
- Track YOC per position, not just portfolio-wide — laggards hide inside averages.
- Never sell a compounder just because YOC looks high; sell when the growth story breaks.
Frequently asked questions
- What is a good yield on cost?
- There is no universal number, but long-term dividend investors often see 8–12% YOC after a decade of owning consistent 6–8% growers. A $42 stock with a $1.40 starting yield reaching $2.90 in ten years lands near 7%. Compare yours against the current market yield to judge whether the position still deserves fresh capital.
- How is yield on cost different from dividend yield?
- Dividend yield uses today's market price; yield on cost uses your original purchase price. The same stock can show a 3% market yield while your YOC reads 7% because you bought years earlier at half the price. Market yield tells you what new money earns; YOC tells you what your old money earns now.
- Is yield on cost a misleading metric?
- It can be. YOC ignores opportunity cost: a 9% YOC sounds great until comparable investments yield more on today's prices. It also flatters stagnant holdings whose dividends merely kept pace decades ago. Treat it as a record of compounding success, never as the sole test for buying more or holding on.
- How long does it take to double yield on cost?
- The rule of 72 applies: at 6% dividend growth your YOC doubles in about 12 years, at 8% in about 9, and at 10% in roughly 7.2 years. A 3% starting yield grown at 8% becomes roughly 6% on your original basis within nine years, assuming raises continue uninterrupted.
- Should I include reinvested shares in my cost basis?
- Yes if you want precision — each reinvested dividend adds shares purchased at that year's price, so blended YOC blends every lot's basis. Many trackers simplify by using one average cost. Either way, stay consistent; switching methods mid-journey makes the trend line meaningless for comparing years.