Free yield-on-cost calculator: calculate your true dividend yield based on your original purchase price vs current dividend payments.
See how dividend growth transforms your yield on the original purchase price over time.
Free yield-on-cost calculator: calculate your true dividend yield based on your original purchase price vs current dividend payments.
Yield on cost (YOC) is a financial metric that measures the annual dividend income you receive relative to the original price you paid for a stock — not its current market price. It is one of the most important tools for long-term dividend investors because it reveals how effectively dividend growth has compounded your income stream over time.
While the standard dividend yield changes every day as the stock price moves, yield on cost is anchored to your personal cost basis. This makes it a powerful way to track how much income your original investment dollars are actually generating. For buy-and-hold investors in dividend growth stocks, YOC often climbs well above the market average yield within just a few years of holding a quality compounder.
The yield on cost formula is straightforward:
For example, if you bought a stock at $40 per share and it now pays $2.40 in annual dividends, your yield on cost is 6.0% — regardless of whether the stock currently trades at $60 or $80. The key insight: your yield is locked to your entry price, and every dividend raise permanently increases it.
Let us walk through a concrete example using Coca-Cola (KO), one of the most famous Dividend Kings with 62+ consecutive years of dividend increases:
That means your personal yield on cost has grown from 3.50% to 5.30% over ten years — a 51% increase in income — without investing a single additional dollar. Your 100 shares now generate roughly $212 per year in dividends compared to $140 when you first bought them.
If dividend growth continues at 5% annually for another 10 years, the projected annual dividend would reach approximately $3.45 per share, pushing your yield on cost to 8.63% on the original $40 cost basis.
These two metrics are often confused, but they answer very different questions:
| Feature | Yield on Cost (YOC) | Current Dividend Yield |
|---|---|---|
| Price Used | Your original purchase price | Today's market price |
| Changes When... | The dividend changes (up or down) | The stock price or dividend changes |
| Best For | Measuring income growth on your investment | Comparing new investment opportunities |
| Limitation | Backward-looking; ignores capital gains/losses | Fluctuates daily with stock price moves |
| KO Example (bought 2016) | 5.30% ($2.12 / $40) | ~2.8% ($2.12 / ~$75) |
Key takeaway: Current yield is the right metric when deciding where to invest new money today. Yield on cost is the right metric when evaluating how well your existing holdings are performing as income generators. Smart dividend investors track both.
There is no universal benchmark, but many dividend growth investors aim for a yield on cost above 5% within 10 years of purchase. Investors who bought blue-chip Dividend Aristocrats like Coca-Cola, Johnson & Johnson, or Realty Income a decade ago often enjoy YOC figures of 5–8% or more today, even though the current market yield on those stocks is only 2–5%.
No. Traditional yield on cost only considers the dividend income relative to your original purchase price. It does not factor in shares acquired through dividend reinvestment (DRIP). If you reinvest dividends, your effective cost basis changes, and you would need to recalculate YOC using your total invested amount. Use our DRIP Calculator to model reinvestment returns separately.
Yes. If a company cuts its dividend, your yield on cost will decrease. For example, many energy companies and REITs reduced dividends during 2020, which lowered YOC for investors who held those shares. This is why it is critical to invest in companies with strong balance sheets and long histories of dividend growth rather than chasing the highest yield alone.
Yes. You can calculate yield on cost for any dividend-paying security, including ETFs like the Vanguard High Dividend Yield ETF (VYM) or the Schwab U.S. Dividend Equity ETF (SCHD). The formula is the same: current annual distribution divided by your original purchase price per share.
Dividend growth rate has an enormous impact on long-term YOC due to compounding. A stock purchased with a 3% starting yield and 7% annual dividend growth will reach a yield on cost of roughly 5.9% after 10 years and 11.6% after 20 years. By contrast, the same 3% starting yield with only 3% dividend growth reaches just 4.0% YOC after 10 years. Use the calculator above to model different growth scenarios.
Yield on cost is backward-looking and does not account for total return (capital gains plus dividends). It can also create a false sense of security: a high YOC does not mean the stock is still a good investment today. A company whose stock price has collapsed may show a high YOC but could be at risk of a dividend cut. Always combine YOC analysis with current yield, payout ratio, and fundamental research.