Financial Tools

Snowball + Yield on Cost Pro Calculator

The ultimate tool — combines dividend snowball compounding with yield-on-cost tracking over time.

Free snowball yield-on-cost calculator: track how your effective yield grows through dividend reinvestment and annual dividend growth.

How to Use the YOC Snowball Calculator

The Yield on Cost (YOC) Snowball Calculator models the compounding power of dividend reinvestment over time. Unlike standard dividend calculators that track yield on current price, this tool tracks yield relative to your original purchase price — which grows each year as dividends are reinvested.

Why YOC matters more than current yield: A shipping stock you bought at $20/share that now pays $3.00/share annually has a YOC of 15% — regardless of whether the current stock price makes the current yield 8% or 12%. YOC tracks the return on your actual investment cost, not today's market price. This is the number that tells you how well your original investment decision is working.

Snowball effect: When dividends are reinvested (DRIP), each reinvestment buys more shares. More shares generate more dividends. Those dividends buy yet more shares. This compounding accelerates dramatically over 10-20 year periods. The calculator shows you the year-by-year snowball growth — both in dividend income and in portfolio value.

Practical example (Marco's framework): A position in TORM (TRMD) purchased at average cost $22/share with a variable dividend averaging $2.50/year gives a YOC of approximately 11.4%. Over 10 years with 5% annual dividend growth and full reinvestment, the YOC on original cost can reach 18-22%. The snowball calculator models this trajectory precisely, allowing you to set realistic income targets before making investment decisions.

YOC ≥8% quality threshold: Marco's personal benchmark is YOC ≥8% within 3-5 years of purchase at original cost. This filter ensures the position generates meaningful income relative to capital deployed. For variable-dividend companies (tankers, coal miners), the YOC calculation uses normalized mid-cycle dividends, not peak cycle payouts. Use the calculator to stress-test different rate/commodity scenarios before committing capital.

Hard-Asset Dividend Snowball: Real-World Sector Examples

The snowball effect is not abstract theory — it plays out differently in each hard-asset sector I follow. Understanding those sector-specific dynamics helps you set more realistic inputs for this calculator and interpret the projections correctly.

Tanker Shipping: Variable Dividends and the Snowball Problem

Tanker companies like TORM (TRMD), Frontline (FRO), and CMB.Tech (CMBT) pay variable dividends tied to quarterly free cash flow. This creates a snowball challenge: the dividend input in any projection model should be a normalized mid-cycle estimate, not the peak-year payout. During 2024, some tanker stocks paid $7–10/share in dividends annually — rates that will not persist through a full cycle.

For the snowball calculator, I use a conservative mid-cycle yield of 6–8% for tankers rather than current peak yields. This produces a more honest projection of what the income stream will look like over 10–15 years. The dividend growth rate input should be set to 0% or even negative for cyclical tankers — the "growth" comes from charter rate cycles, not structural dividend increases. Despite this, tanker stocks can still build significant snowballs because the base yields are high enough to generate meaningful reinvestment at any price point below the cycle peak.

Midstream Pipelines: The Ideal Snowball Asset

Midstream pipeline companies represent the closest thing to a reliable dividend snowball machine in hard assets. Enbridge (ENB) has raised its dividend for 29 consecutive years at a compound annual growth rate near 10%. TC Energy (TRP) and Kinder Morgan (KMI) offer similar profiles: fee-based revenues from long-term contracts, low direct commodity price exposure, and explicit multi-year dividend growth guidance.

For pipelines, the snowball calculator inputs should reflect the company's own stated guidance. Enbridge targets 3–5% annual dividend growth through 2026. At a starting yield of 6.5% and 4% annual growth, the YOC on a 15-year position would reach approximately 11.7%. That is a compounding outcome available from a low-risk, infrastructure-backed dividend payer — not a speculative position.

Mining Stocks: Commodity Cycles and Payout Variability

Mining companies sit between pipelines and tankers on the predictability spectrum. Major diversified miners like BHP and Rio Tinto pay variable dividends (typically 50% of underlying earnings) that fluctuate significantly with commodity prices. Specialty miners in coal (Thungela, Whitehaven) have paid extraordinary dividends during commodity upcycles but will see those compressed when prices normalize.

The honest approach for mining snowball projections: use the previous 5-year average dividend rather than the most recent payment, and set dividend growth at 2–4% to reflect long-term commodity inflation rather than recent cycle peak payouts. Even conservative mining snowball projections show strong outcomes because the base yields — often 5–9% on normalized earnings — are higher than most non-resource sectors.

The Three Inputs That Matter Most

From running this calculator across hundreds of portfolio scenarios, three inputs have the most decisive impact on the final YOC and portfolio value:

  1. Starting yield (not dividend growth rate): In hard assets, starting yield dominates outcomes over 20 years because growth rates are moderate and variable. A 9% starting yield with 2% growth beats a 4% starting yield with 8% growth for the first 15 years. At year 20 they converge. This means getting the entry price right — buying at a historically attractive yield — matters enormously.
  2. Monthly contribution consistency: The compounding in this calculator accelerates most dramatically when contributions continue through market downturns. Investors who stop buying when yields spike (prices fall) lose the best reinvestment opportunities. Setting a fixed monthly contribution and holding to it through full cycles is how real snowballs are built in practice.
  3. Reinvestment completeness: The difference between full DRIP (100% reinvestment) and taking dividends as cash is substantial over 15–20 years. At 7% yield with 5% growth over 20 years, full DRIP produces roughly 2.4x the final portfolio value versus zero reinvestment. Even partial DRIP (50%) captures most of the benefit.

All projections are hypothetical and assume constant dividend growth, full reinvestment, and no tax drag. Real outcomes vary with market prices, dividend changes, taxes, and transaction costs. This tool is for illustrative and educational purposes only. Not financial advice. Always verify dividend data from official company filings before making investment decisions.

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