Yield on Cost

What Is Yield on Cost (YOC)?

Yield on cost (YOC) is a measure of dividend yield calculated by dividing a stock’s current dividend by the price initially paid for that stock. For example, if an investor purchased a stock five years ago for $20, and its current dividend is $1.50 per share, then the YOC for that stock would be 7.5%.

YOC should not be confused with the term “current dividend yield.” The latter refers to the dividend payment divided by the stock’s current price, rather than the price at which it was initially purchased.

KEY TAKEAWAYS

YOC is a measure of dividend yield based on the original price paid for the investment.

YOC can grow significantly over time if the company regularly increases its dividend, so investing for dividend growth is the way for long-term investors to maximize YOC.

Investors using YOC should ensure they do not compare it to other stocks’ current dividend yields, as this is an apples-to-oranges comparison.